USD / CAD eased on Friday but ended the week up 1.3%. The strong gains in the dollar came in the wake of higher than expected inflation figures. The US Department of Commerce on Friday reported stronger-than-expected US retail sales, which will fuel GDP growth. The dollar was generally mixed against most major currencies. US yields were slightly higher but remain under pressure following testimony from Fed Chairman Powell this week, which shows the Fed is determined to keep rates unchanged, despite rising inflation expectations.
USD / CAD consolidated on Friday after hitting a 3-month high on Thursday. The currency pair is ready to test resistance near April highs at 1.2658. Support is near the 20 day moving average at 1.2418. Short-term momentum is positive as the Rapid Stochastic has generated a cross buy signal. The exchange rate is overbought. The current reading on the Fast Stochastic is 91, above the overbought trigger level of 80 which heralds a correction. Medium-term momentum is positive as the MACD (Moving Average Convergence Divergence) histogram prints in positive territory with an upward sloping path that indicates a higher exchange rate.
Retail sales increase more than expected
Retail sales in the United States unexpectedly rose in June, rising 0.6% from expectations that spending would decline 0.3%. Sales jumped 18.0% year-on-year. Most of the spending was on restaurants and hospitality as people started traveling and dining out in June. Excluding autos, gasoline, building materials and food services, retail sales rose 1.1% last month. This is a robust gain for a matrix that most closely matches the direction of GDP growth. Remember that about 66% of the US GDP comes from consumer spending.