Canadian Dollar Surprisingly Rebounds Though Retail Sales Declined More Than Forecast
THE TAKEAWAY: Canadian Retail Sales Declined > Motor vehicles and part dealer significantly plunged > CAD Surprisingly Rebounds
The report released by Statistics Canada revealed that domestic retail sales in July tumbled 0.6 percent to $37.5 billion after it climbed 0.8 percent to C$37.8 billion in the previous month. Meanwhile, economists called for a smaller loss of 0.3 percent, according to the Bloomberg survey. As the auto sector is excluded, the figure was flat, same with a revised upward 0.0 percent in June but well below economists’ expectations of 0.2 percent advance.
Canadian Retail Sale: January 2010 to Present
Prepared by Trang Nguyen
Lower retail sales in July, after climbing in three previous months, were triggered by losses in seven of 11 major categories, with motor vehicles and part dealer mostly contributed to the decline. Automotive sector retreated 2.8 percent as Japanese automakers continued to face shortages and General Motors of Canada, Ltd, struggled to keep certain models of its most popular vehicles in stock at dealerships. As a result, sharp fall in new and unused cars completely erased all gains made in June.
AUD/CAD 1-minute Chart: September 22, 2011
Charts created using Strategy Trader– Prepared by Trang Nguyen
The one-minute AUDCAD chart above illustrated that the currency pair traded in narrow range from 1.1014 to 1.1016 two hours before the data release. Surprisingly, the AUD/CAD started its downward trend even though Canadian retail sales reported worse than estimates. The Relative Strength Indicator (RSI) below 30 showed that the currency pair was in oversold territory. Also, the Stochastic Slow indicator crossing below 20 signaled market participants’ oversold reactions. At the time this report was written, traders are massively selling the aussie in favor of the loonie. The suddenly reverse trend might be explained that negative effects of disappointing figure had already priced in the currency pair before the report issued. Due to a recent warning of a slowdown in Canadian economy, the reading today seems not surprise investors and monetary managers.
Written by Trang Nguyen, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.