CAD: Pivot around 1.42 extends ahead of Retail Sales, Macklem - Scotiabank

The Canadian Dollar (CAD) is a very moderate loser on the day, down a little more than 0.1%. The CAD continues to track the broader trend in the USD and will likely continue to do so for now, Scotiabank's Chief FX Strategist Shaun Osborne notes.  

CAD is trading marginally lower

"Today's Retail Sales data may add a little positive momentum to the CAD; sales are expected to rise 1.6% in December (per the Statcan flash estimate) but most interest is likely to fall on BoC Governor Macklem's speech on 'trade friction, structural change and monetary policy' (12.30ET) which will give a little more insight into how the Bank is framing the policy outlook amid heightened trade tensions. There will be a Q&A session after his comments and media availability after the event."

"Markets have priced out much of the near-term easing risk that developed around the early February tariff threat and swaps have pushed out the first expected cut to June/July. Macklem may highlight that volatility and uncertainty are a brake on growth and messaging may stress caution and uncertainty around the outlook. Still, easing policy remains the main risk, in contrast to the more cautious stance of the Fed. The wide/widening policy spread remains a drag on the CAD's ability to improve significantly for now."

"Spot eased fractionally more than I expected yesterday, reaching the 1.4170 area, but the USD continues to consolidate around the 1.42 point essentially. Support can be refined to 1.4145/50 (100-day MA and last week's low) ahead of major retracement support at 1.4107 (50% retracement of the USD's 1.34/1.48 rally). Resistance remains 1.4250/55."