GBP/USD, USD/CAD, USD/MXN – North American Session Daily Forecast

Canadian dollar, British Pound show limited movement, Mexican peso gains ground. Investors eye U.S. retail sales
Kenny Fisher

GBP/USD

The British pound is almost unchanged on Thursday. GBP/USD is trading at 1.2330 in the North American session, down 0.03% on the day.

U.S. Inflation Mixed, Retail Sales Next

The August CPI release slipped to 0.1%, down from 0.3% a month earlier. This matched the estimate. Core CPI, which excludes the most volatile items found in CPI, remained steady at 0.3%, edging above the estimate of 0.2%.

On Friday, the markets will get a look at consumer spending, with the release of retail sales reports of August. Investors are bracing for soft numbers. Retail sales are expected to drop to 0.2%, down from 0.7% a month earlier. The core release is forecast to slow to 0.1%, after a sparkling gain of 1.0% in July. If retail sales do slow considerably, there is a strong chance that the pound could take advantage and respond with gains.

Technical Analysis

GBP/USD tested resistance at 1.2329 early in the week, but the pair has been unable to move past this line, which remains fluid. If the pair can sustain some positive momentum, there is room for upward movement, as the next resistance line is at 1.2420.  On the downside, 1.2329 is providing immediate support. 1.2180 is the next support level.

GBP/USD 4-Hour Chart

USD/CAD

USD/CAD has posted small gains on Thursday. In the North American session, the pair is trading at 1.3203, up 0.14% on the day.

OPEC Forecast Sends Oil Plunging

Canada is a major oil producer, so a sharp drop in oil prices can have a negative effect on the Canadian dollar. This hasn’t been the case this week as a 5.2% decline in oil prices since Tuesday has not affected the Canadian currency. Crude oil prices fell on Thursday after OPEC lowered its forecast for global oil demand for the rest of 2019. The softer forecast was a result of weak global growth in the first half and the expectation that economic conditions would remain weak for the remainder of 2019. At the same time, if oil prices continue to drop, this could result in the Canadian dollar falling as well.

U.S. Consumer Price Index Slips

The August CPI release slipped to 0.1%, down from 0.3% a month earlier. This matched the estimate. Core CPI, which excludes the most volatile items found in CPI, remained steady at 0.3%, edging above the estimate of 0.2%.

There was only one Canadian release on Thursday. The New Home Price Index declined by 0.1% for a third straight month. The index has not recorded a gain in over a year, pointing to weak activity in the housing sector.

U.S. Retail Sales Wrap up Week

The U.S. releases key consumer spending numbers on Friday. The markets are expecting weaker numbers in August, and this could sour risk appetite and weigh on the Canadian dollar.

Technical Analysis

Range trade remains the name of the game this week for USD/CAD. The pair has been unable to break through resistance at 1.3200, although this line is currently under strong pressure. The pair tested support at 1.3140 earlier in the week, but this line continues to frustrate any attempt by the Canadian dollar to gain ground.

USD/CAD 4-Hour Chart

USD/MXN

After an uneventful week, USD/MXN is showing stronger movement on Thursday. In the North American session, the pair is trading at 19.42, down 0.41% on the day.

U.S CPI Dips, but Matches Forecast

U.S. consumer inflation reports were mixed on Thursday. The August CPI release slipped to 0.1%, down from 0.3% a month earlier. This matched the estimate. Core CPI, which excludes the most volatile items found in CPI, remained steady at 0.3%, edging above the estimate of 0.2%.

Weak Retail Sales Could Hamper Peso

All eyes are on U.S. retail sales, the primary gauge of consumer spending. Investors are bracing for soft numbers for August. The headline release is expected to slow to 0.2%, down from 0.7% a month earlier. The core release is forecast to fall sharply to 0.1%, after a sparkling gain of 1.0% in July. If the forecasts prove accurate, I would expect the risk currencies like the peso to lose ground.

Technical Analysis

After a week of range trade, the peso is showing some strength on Thursday. The pair is testing support at 19.45, which has held since August 12. If the pair can break below this level, I expect further gains for the peso. On the upside, 19.70 has some breathing room in resistance, as the USD/MNX has headed to lower ground.

USD/MXD 4-Hour Chart

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