Canada’s July retail sales coming up

The USD continued to edge higher yesterday and during today’s Asian session, as if the Fed’s interest rate decision on Wednesday continues to provide some support for the greenback. On a fundamental level we note that the Trump government continued to intervene in the Fed’s work while it also asked the US Supreme Court to allow the administration to go ahead with firing Fed Board Governor Cook a move with a dovish interpretation for the markets. Also, the legal process at which Trump’s tariffs are being set under doubt is ongoing with the Supreme Court setting the 5th of November as the date at which it will hear the arguments pro and against the case. No major financial releases are expected from the US today hence fundamentals may lead the US markets. Beyond the FX market US equities markets seem to maintain their optimism as all three major indexes, Dow Jones, Nasdaq and S&P 500 ended their day in the greens. Furthermore, we note that the movement of gold seems to remain closely related to the developments in the Fed.

After gold’s price hit a ceiling at the 3710 (R1) resistance line, corrected lower and seems to be stabilizing currently. Our sideways movement bias as expressed in yesterday’s report is being maintained for the time being yet also note that the RSI indicator remains near the reading of 70 implying that the market sentiment for gold’s price is still bullish. For the bullish outlook we would require gold’s price to break the 3710 (R1) resistance line and set as the next possible target for the bulls the 3850 (R2) level. Should the bears take over we may see gold’s price breaking the 3575 (S1) line and start aiming for the 3450 (S2) support level.

Today we highlight the release of Canada’s retail sales for July which are expected to show a contraction of -0.8%mm, if compared to June’s 1.5%yy in a signal of a weak demand side for the Canadian economy. Should the rates show an even deeper contraction that expected we may see the Loonie losing some ground, while should the rates slow down less than expected or even fail to slow down, we may see the Loonie getting some as a relative resilience of the demand side of the Canadian economy may be implied.

USD/CAD edged higher yesterday, yet remained well between the 1.3720 (S1) support line and the 1.3880 (R1) resistance level. We maintain our bias for the sideways motion to continue as long as the pair’s price action remains within the corridor formed by the 1.3720 (S1) support line and the 1.3880 (R1) resistance level. Also we note that the RSI indicator has reached the reading of 50 implying an erasing of any bearish tendencies of the market for the pair, yet also the absence of any bullish predisposition of the market currently. For a bullish outlook to emerge, we would require the pair’s price action to break the 1.3880 (R1) resistance line and start aiming for the 1.4020 (R2) resistance level. For a bearish outlook to be adopted, we would require the pair to break the 1.3720 (S1) line and start aiming for the 1.3550 (S2) support base.

On a monetary level, we note BoE’s interest rate decision yesterday to remain on hold, keeping rates at 4% while at the same time highlighted risks related to inflationary pressures in the UK economy, which may imply that the bank intends to keeps rates steady for longer. In Japan BoJ also remained on hold keeping rates at 0.5% as was widely expected and outlined the frame for selling ETF’s and REI-T’s giving a hawkish flair for its intentions.

Other highlights for the day:

Today we note the slight easing of UK’s retail sales growth rate for August and also note the release of France’s business climate for September and Germany’s PPI rates for August. On a monetary level we note that ECB President Lagarde is to take part in the Euro Group meeting and late in the American session San Francisco Fed President Daly speaks. In Monday’s Asian session we note the release of China’s PBoC interest rate decision, while in Australia RBA Governor Michell Bullock speaks.

USD/CAD Daily Chart

• Support: 1.3720 (S1), 1.3550 (S2), 1.3420 (S3)
• Resistance: 1.3880 (R1), 1.4020 (R2), 1.4145 (R3)

XAU/USD Daily Chart

• Support: 3575 (S1), 3450 (S2), 3245 (S3)
• Resistance: 3710 (R1), 3850 (R2), 4000 (R3)

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