US retail sales and Canada’s CPI rates for November

The USD seems to remain supported against its counterparts, as the Fed’s interest rate decision looms tomorrow and the market increasingly expects the bank to signal an easing of its rate-cutting path. We note that the USD is to have its last big test today, before the rate decision with the release of November’s retail sales and industrial output growth rates for November which are to provide more clues about economic activity in both the demand and supply sectors of the US economy. Especially the retail sales growth rate is expected to be closely watched as November signals the start of Christmas shopping season with Black Friday. A possible acceleration of the rates could provide support for the USD as it would indicate that the US economy remained supported in the past month.

North of the US border in today’s early American session, we get Canada’s CPI rates for November. Should the rates slow down implying an easing of inflationary pressures, we may see the release weighing on the Loonie in such a scenario as it would imply further easing of inflationary pressures in the Canadian economy and thus enhance BoC’s dovishness. In case the rates accelerate implying the opposite, we may see the CAD getting substantial support. Please note that fundamentally, the Loonie seems to be suppressed also by US President-elect Donald Trump to impose tariffs on US imports from Canada, while at the same time, oil prices tend to largely follow a sideways motion failing to support the Loonie. 

USD/CAD edged higher yesterday aiming for the 1.4270 (R1) resistance line. We maintain our bullish outlook for the pair as long as the upward trendline guiding the pair since the 25^th of September. Furthermore the RSI indicator is at the reading of 70, implying a strong bullish sentiment for the pair yet at the same time, it may imply that the pair is at overbought levels and may be ripe for a correction lower. Also the price action is flirting with the upper Bollinger band sending similar signals. Should the bulls maintain control over the pair as expected, we may see it breaking the 1.4270 (R1) resistance line, paving the way for the 1.4420 (R2) resistance level. A bearish outlook seems remote currently and for it to emerge we would require the pair to break the 1.4110 (S1) support line, break the prementioned upward trendline in a first signal that the upward movement has been interrupted and aim if not reach the 1.3960 (S2) support level. 

Across the Atlantic we got in today’s early European session October’s UK employment data, which came in hotter than expected, thus supporting the pound. Characteristically the unemployment rate remained unchanged, while the employment change figure surprisingly failed to drop as widely as expected and the average earnings growth rate accelerated implying that the UK employment market is to continue to support inflationary pressures in the UK economy. Please note that the release may have been closely watched by BoE policymakers which are to reach an interest rate decision on Thursday, yet before that, we also note the release of the UK CPI rates for November tomorrow.   

GBP/USD yesterday bounced on the 1.2620 (S1) support line, moving higher. The movement tended to reaffirm our bias for a sideways motion of the pair. Furthermore, we note the RSI indicator remains just below the reading of 50, yet nothing convincing for a bearish outlook. Should the bears take over, we may see cable breaking the 1.2620 (S1) support line and aiming for the 1.2470 (S2) base. Should the bulls take over, we may see the pair breaking the 1.2845 (R1) level, opening the gates for the 1.3040 (R2) resistance barrier.     

Other highlights for the day:

In today’s European session, we get Germany’s IfO and ZEW  indicators for December and ECB Board Member Elderson speaks. On Wednesday’s Asian session, we get Japan’s trade data and Chain store sales for November.

USD/CAD  Daily Chart

• Support: 1.4110 (S1), 1.3960 (S2), 1.3820 (S3)
• Resistance: 1.4270 (R1), 1.4420 (R2), 1.4560 (R3)

GBP/USD  Daily Chart

• Support: 1.2620 (S1), 1.2470 (S2), 1.2300 (S3)
• Resistance: 1.2845 (R1), 1.3040 (R2), 1.3260 (R3)

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