- The US-China trade tension spreads across the market.
- Headline data from the US and Canada will be looked for fresh impulse.
The USD/CAD pair refrained from stretching previous declines as fresh signs of escalating trade tensions between the US and China propelled the quote to 1.3470 during initial Wednesday.
Upbeat comments indicating sooner end to the latest US-China tariff war from the US President Donald Trump and the announcement of the US Treasury Secretary Steve Mnuchin’s Beijing visit for further talks helped commodity-linked currencies on Tuesday.
Though, optimism at commodity front couldn’t last long after China’s Global Times mentioned that the dragon nation may reduce its dependence on the US energy exports as a part of retaliation to the Trump administration’s tariff hike.
Pessimism surrounding global trade and China weighed heavy on Canada’s largest export item, Crude, that was earlier bearing the burden of a surprise increase in the American Petroleum Institute’s (API) weekly US crude oil stock.
April month details of Canada’s consumer price index (CPI) and the US retail sales will be in the spotlight for the Loonie traders while developments surrounding the US-China trade could keep playing background music.
Canada’s CPI (MoM) is expected to decline from 0.7% to 0.3% whereas Bank of Canada’s (BOC) consumer price index core (YoY) might rise to 1.8% from 1.6%. It should also be noted that the CPI might soften to 1.7% from 1.9% on a yearly basis with BOC CPI core likely flashing 0.0% mark versus 0.3% prior on a monthly format.
Further, the US retail sales growth may drop to 0.2% from 0.6% on MoM with the headline retail sales control group likely declining to 0.4% from 1.0% prior. Additionally, retail sales ex-autos, also known as core retail sales, could dip to 0.7% against 1.2% previous readout.
Technical Analysis
The 1.3500 round-figure acts as an immediate upside resistance for the pair, a break of which can escalate the recovery towards the four-month-old ascending trend-line, at 1.3550 now. Also, 1.3565, 1.3620 and December 2018 highs near 1.3665 could entertain buyers then after.
On the downside, 50-day simple moving average (SMA) near 1.3390 and an upward sloping trend-line since late-February at 1.3360 can limit the quote’s short-term declines.
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