Canadian Dollar backslides a little further against Greenback on Wednesday

• Canadian Dollar sees some gains but loses further ground against US Dollar.
• Low-impact Canada economic data fails to move the needle as investors focus on US data.
• Crude Oil bids struggle to hold steady, limit Loonie gains.

The Canadian Dollar (CAD) found some gains against most of its major currency peers, but saw further declines against the US Dollar (USD) on Wednesday after US Retail Sales ran hotter than markets anticipated. 

Canada’s Raw Material Price Index shrank in December for the second month in a row, keeping materials inflation at its steepest contractionary level since last June, while Foreign Investment in Canadian Securities slightly undershot Canadian investment outflows.

Market focus was squarely on US Retail Sales, which jumped much higher than anticipated, making it difficult for investors to continue betting on a faster pace of rate hikes from the Federal Reserve (Fed).

Daily digest market movers: Canadian Dollar firms up, but not enough to overcome Greenback flows

• Canada’s Raw Material Price Index fell 4.9% in December, in-line with the previous figure (revised down from -4.2%) and completely missing the market forecast of -1.6%.
• Canadian Industrial Product Prices also declined in December, falling 1.5% versus the forecast of -0.7% and declining even further from the previous month’s -0.3% (revised down slightly from -0.4%).
• US Retail Sales climbed 0.6% in December, with Retail Sales excluding automobiles also gaining 0.4% over the same period; median market forecasts expected Retail Sales to come in at 0.4% versus the previous 0.3%.
• US Industrial Production grew 0.1% in December, a scant figure but more than the forecasted flat reading of 0.0% and November’s 0.0% (revised down from 0.2%).
• With the US domestic economy continuing to show signs of strength, money markets are pulling away from Fed rate cut bets in frustration, bolstering the US Dollar across the board.
• Crude Oil markets continue to struggle, weakening the Canadian Dollar’s strength base.
• China’s faltering growth outlook early Wednesday pushed Crude Oil lower as barrel traders grow concerned about China’s fossil fuel demand outlook, while a strengthening US Dollar waters down barrel bids.
• Crude Oil markets continue to see upside shocks as geopolitical concerns weigh on investor sentiment, but faltering Crude Oil momentum sees little support transfer to the Loonie.

Technical Analysis: Canadian Dollar struggles to recover after USD/CAD hits 1.3540

The Canadian Dollar (CAD) is down a fifth of a percent against the US Dollar on Wednesday, shedding around half a percent against the Pound Sterling (GBP), while the CAD gained around two-thirds of a percent against the Australian Dollar (AUD) and the Japanese Yen (JPY).

The Canadian Dollar saw further declines against the US Dollar, with the USD/CAD hitting a five-week high of 1.3540. Intraday momentum is leaning into the top side as US Dollar strength continues to push the pair higher. In the near term, the USD/CAD is trading well above the 200-hour Simple Moving Average (SMA) near 1.3400.

Continued bullish momentum in the USD/CAD has the pair challenging a congestion zone that sees the 50-day and 200-day SMAs consolidating near the 1.3500 handle, and the pair has closed close to flat or in the green for all but one of the last 14 consecutive trading days.

USD/CAD Hourly Chart

USD/CAD Daily Chart