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Strong Canadian Retail Sales Conflicts with Bearish Loonie Technical Outlook

Tuesday, 25 November 2008 08:11:41 GMT  |  John Rivera, Currency Analyst

Canadian retail sales are expected to have gained 0.4% in September as lower inflation on the back of declining fuel costs increased consumer’s purchasing power.

Fundamental Outlook

Canadian retail sales are expected to have gained 0.4% in September as lower inflation on the back of declining fuel costs increased consumer’s purchasing power.  However, the backward looking indicator doesn’t reflect the drop in confidence that was seen in October following the freezing of the credit markets and banking sector troubles. The Canadian labor remains strong adding another 10,000 jobs in October following a 106,000 gain in September which could support domestic growth. Therefore, a bigger than expected print is feasible which could extend the current bullish momentum. However, if recession concerns started to creep into consumer’s mindsets then they could have begun to retrench leading to a drop in spending. The expected bullish data conflicts with the Canadian dollar technical outlook for further losses with a push above 1.3020. Recent bullish “loonie” price action has it headed for support levels and if the retail sales disappoints we could see a reversal and a fulfillment of the technical call.

 

Technical Outlook

There is no change to the call for a push above 1.3025 prior to formation of a more important top.  This call remains as long as price is above 1.2082.  An unexpected drop below there would require a re-examination of the pattern.

 

 

For More Technical Analysis Visit the Daily Technical Report

 

To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com

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