Montreal, CA - 23 May 2020: People in line to buy ice-cream during Coronavirus pandemic on Laurier street. Image source: marcbruxelle © 123RF.com
Earlier today, Statistics Canada released its monthly retail sales report, in which it was revealed that the Canadian economy had experienced a seesaw rebound from the slump that was registered in April.
Retail sales soared by 18.7 per cent in May, which is the biggest hike on record but fell short of the initial projections of a 20 per cent gain. Thus, the retail industry managed to recuperate partially from the devastating 25 per cent crunch from a month prior.
Canada MoM Retail Sales. Image source: TradingEconomics.com
May's slump was attributed to the government restrictions from that time, which encompassed Canada's combined effort to curtail the spread of the coronavirus. The period between mid-March and late-April saw the biggest slump in overall economic activity across the world from the start of the crisis onwards.
As the containment restrictions started to gradually ease, however, the activity was allowed to pick up once again. This is also demonstrated by the underlying improvement in the national labour market that was registered in June.
Now that prominent pharmaceutical and biotech companies have started to flaunt the success of their COVID-19 vaccine research, all prerequisites for a stable recovery seem to be in place.
Hence, the sudden jump in Canada's retail sales is unlikely to be a one-off event. Rather it could be perceived as an early indication of a lasting and profound road to recovery.
These results have lifted investors' optimism in Canada, which also had a positive impact on the value of the Canadian dollar. The loonie advanced against the greenback during today's trading session, as the latter weakened due to the strengthening euro.
As can be seen on the 4H chart below, the USDCAD broke down below the Accumulation range's lower boundary, and a snap reversal seems increasingly less likely.
Even though the price action remains concentrated below the 10-day MA (in red) and the 10-day EMA (in blue), there is yet hope for the market bulls. The underlying market sentiment remains range-trading, and the 'Oversold' reading of the Stochastic RSI could prompt heightened buying pressure in the near term.
It all depends on how the underlying fundamental factors develop from here on out, and whether the successful deal in Brussels would continue to pressure the value of the greenback indirectly.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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