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Swissie Surges as CAD Slides on Weak Retail Sales, Inflation

Swissie Surges as CAD Slides on Weak Retail Sales, Inflation

2011-05-20 14:09:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Swissie_Surges_as_CAD_Slides_on_Weak_Retail_Sales_Inflation_body_Picture_2.png, Swissie Surges as CAD Slides on Weak Retail Sales, InflationSwissie_Surges_as_CAD_Slides_on_Weak_Retail_Sales_Inflation_body_Picture_3.png, Swissie Surges as CAD Slides on Weak Retail Sales, InflationSwissie_Surges_as_CAD_Slides_on_Weak_Retail_Sales_Inflation_body_Picture_4.png, Swissie Surges as CAD Slides on Weak Retail Sales, Inflation

The Swiss franc surged against the greenback in pre-market trade, besting the majors as the top performer at the open. The USDCHF pair continues to range between the upper and lower bound trendlines of the descending wedge formation that dates back to May 13th. Yesterday’s Winners/Losers report noted bullish divergence in the RSI indicator; consequently the pair did advance testing the upper bound trendline at the 0.8880 resistance level. The pair currently rests just above the 0.8765 support level with interim targets called higher at the 0.88-handle. A breach above this level eyes targets at 0.8825 and at the 23.6% Fibonacci extension taken from the May 4th and 19th troughs at 0.8860. The swissie is likely to remain range bound in this formation, with a downside break eying stronger support lower at 0.8740 and 0.8710.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.8947

20-Day SMA

0.8760

10-Day SMA

0.8816

2011 Low

0.8551

Swissie_Surges_as_CAD_Slides_on_Weak_Retail_Sales_Inflation_body_Picture_5.png, Swissie Surges as CAD Slides on Weak Retail Sales, InflationSwissie_Surges_as_CAD_Slides_on_Weak_Retail_Sales_Inflation_body_Picture_6.png, Swissie Surges as CAD Slides on Weak Retail Sales, Inflation

The loonie saw sharp declines in pre-market trade on weaker than expected inflation and retail sales data. April CPI figures came in lower than expected with a print of 0.3% m/m, while the year on year figure held at 3.3%. The news saw traders discounting future rate hikes as inflation concerns are likely to stay anchored at these levels. Retail sales data followed up with a flat print, missing calls for a read of 0.9% m/m, accelerating the loonies’ decline. Falling crude oil prices should keep the Canadian dollar under pressure in the interim. The USDCAD pair broke through the upper bound trendline of the descending channel that has held since the May 17th before encountering resistance at the 76.4% Fibonacci extension taken from the May 1st and 11th toughs at 0.9720. The pair is called higher with a likely break here eying topside targets at 0.9750 and the 100% Fibonacci extension at 0.9780. Note that relative strength suggest the move may have been over-extended to the topside here, with a correction likely at some point in North American trade. Support starts at the 0.97-handel, backed by the 61.8% Fib extension at 0.9680 and 0.9640.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9654

20-Day SMA

0.9606

10-Day SMA

0.9662

2011 Low

0.9443

Today’s Events

Date

GMT

Importance

Release

Expected

Prior

Actual

5/20

11:00

MEDIUM

Consumer Price Index (MoM) (APR)

0.5%

1.1%

0.3%

5/20

11:00

HIGH

Consumer Price Index (YoY) (APR)

3.4%

3.3%

3.3%

5/20

11:00

MEDIUM

Bank Canada Consumer Price Index Core (MoM) (APR)

0.2%

0.7%

0.2%

5/20

11:00

HIGH

Bank Canada Consumer Price Index Core (YoY) (APR)

1.6%

1.7%

1.6%

5/20

11:00

LOW

Consumer Price Index (APR)

-

119.4

119.8

5/20

12:30

MEDIUM

Retail Sales (MoM) (MAR)

0.9%

0.4%

0.0%

5/20

12:30

MEDIUM

Retail Sales Less Autos (MoM) (MAR)

0.7%

0.7%

-0.1%

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report, please send inquiries to:mboutros@dailyfx.com

You can also follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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