USD/CAD expected to bounce higher again soon

Buying USD/CAD After the Retrace Down, As Retail Sales Remain Negative for May

Posted Friday, July 23, 2021 by
Skerdian Meta • 2 min read

USD/CAD expected to bounce higher again soon

USD/CAD was on a massive bearish trend, which lasted for more than a year, sending this pair from 1.4660s in March last year to 1.20 in May this year. But, that big round level held and the price started to reverse higher. During the decline moving averages were acting as resistance, particularly the 50 SMA (yellow) but the price broke above them all on the daily chart, reinforcing the trend reversal. The 20 SMA (gray) turned into support eventually and has been pushing the price higher for more than a month, holding well during pullbacks lower.

We saw a pullback to that moving average this week, so we decided to open a buy forex signal a while ago. Yesterday, the daily candlestick closed as a doji, which is a bullish reversing signal for USD/CAD after the pullback in the previous two days, so this trade looks good at the moment. The Canadian retail sales report for May, which was released a while ago, showed that sales remained negative that month too, so fundamentals are pointing up for this pair as well. Below is the Canadian retail sales report:

USD/CAD Live Chart

USD/CAD

Canada May Retail Sales Report And June Prelim Estimates

May retail sales -2.1% vs -3.0% expected
April was -5.7%
May retail sales ex autos -2.0% vs -2.2% expected
Sales ex autos and gas -2.4% vs -7.6% prior
Sales down in May in 8 of 11 subsectors
5.6% of retailers were closed at some point in May compared to approximately 5.0% the month prior
Full report

April and May were expected to be soft months due to lockdown measures but the May reading was a tad stronger than expected, and better than the -3.2% preliminary estimate from Statistics Canada. The rebound in June coincides with fewer lockdown measures and suggests Canadians were eager to spend.

The largest decrease in May sales came in the building materials and garden equipment area, down 11.3% in the month in the second month of sharp declines. That may reflect consumers balking at the run-up in lumber prices.

Other sector data showed sales at motor vehicle and parts dealers down 2.4% and clothing stores down 11.2%. Positive contributions came from food and beverage (+0.8%) and gas stations (+0.9%).

The main declining provinces were the largest one: Ontario where sales fell 2.1% in the fourth decline in six months and Quebec down 2.5%. The lockdown in Quebec eased in June but continued in Ontario.

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