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'The solid run of Canadian data continues. There's nothing here to alter the Bank of Canada's now more hawkish path.' — Benjamin Reitzes, Bank of Montreal

Canadian retail trade rebounded more than expected in April amid higher gasoline prices and higher demand for home appliances and garden supplies. Statistics Canada reported on Thursday that retail sales climbed 0.8% in April, following the preceding month's downwardly revised gain of 0.5% and surpassing analysts' expectations for a 0.3% increase. Apart from that, Thursday's data showed that core retail sales surged 1.5% during the same month, compared to March's upwardly revised fall of 0.1%, whereas analysts anticipated a rise of 0.6%. In volume terms, sales advanced 0.3%. Sales in the building material, garden equipment and supplies sector climbed 3.5%, marking the largest gain in about two years. Furthermore, sales at merchandise stores advanced 2.1%, while sales at gasoline stations rose 1.7% helped by higher prices. In the meantime, sales of vehicles and parts dropped 1.0%. Moreover, Statistics Canada said sales were up in nine out of the 11 subsectors, accounting for 71% of total retail trade. Analysts suggest strong retail sales figures would likely please the Bank of Canada ahead of its next policy meeting.

'Our findings suggest that the labor market has already slightly overshot full employment.' - Daan Struyven, Goldman Sachs

The number of Americans filing for unemployment benefits rose slightly last week, official figures revealed on Thursday. The US Department of Labour reported that initial jobless claims rose to 241K in the week ended June 16, following the preceding week's upwardly revised 238K but meeting market analysts' expectations. Initial claims remained below the 300K level for the 120th week, the longest streak since 1973. The four-week moving average of initial jobless claims climbed 1.5K to 244,750 last week, the highest level since April. Apart from that, Thursday's data also showed that the number of people continuing to receive jobless benefits rose 8K to 1.94M in the week ended June 10. Continuous claims remained below the 2M level for 10 consecutive weeks, pointing to the strong labour market trends. According to some analysts, the US labour market is at or close to full employment, with the unemployment rate at a 16-year low of 4.3%. If the jobs market continues to perform strong, the Fed will likely speed up interest rate hikes. However, to make the next rate hike policymakers will also focus their attention on inflation growth.

USDCAD has been in a downtrend since falling from the May 5 high of 1.3792. There is risk to the downside since the momentum indicators are bearish. RSI is below 50 and MACD is below zero and trending down.

Other bearish signals were given when the tenkan-sen crossed below the kijun-sen on May 24. Trend indicators are also showing a bearish picture, as the market is below the Ichimoku cloud and below the 200-day moving average.

Major resistance is now being provided by this 200-day MA at 1.3342. A sustained break above this would start to weaken the downside bias and prices would target the base of the cloud at 1.3507. From here prices would move into the cloud. Rising above the cloud top at 1.3612 would negate the bearish bias.

Immediate support is at the June 14 low of 1.3163 and a fall below this level would target the January 31 low of 1.2968.

In the bigger picture, staying within the range of 1.3000 and 1.3600 would keep a neutral bias for the medium-term

As the Asian trading session is coming to a close, the dollar is modestly down while commodity-linked currencies, such as the loonie, are gaining ground versus the greenback on the back of oil rising.

The dollar index, a broader gauge of the US currency's strength, was last down two-tenths of a percent on the day. Dollar/yen was slightly down at 111.25. If it closes the day lower, it would be the fourth consecutive day of declines for the pair. The retreat in the previous three days was only minor in nature though, failing to erase the greenback's gains versus the yen on Monday. Euro/dollar was up at 1.1177, more than making up for yesterday's fall by 0.1%.

Among others, the final core PCE figure for the first quarter of the year, which is the Federal Reserve's preferred inflation measure, will be released next week. It will be closely watched given recent weak inflation numbers out of the US. Should the measure disappoint, market participants might fear it would postpone the Fed's plans on hiking rates.

Sterling faced added volatility this week on conflicting signaling by Monetary Policy Committee (MPC) members, including the Bank of England Governor, Mark Carney. The last member to contrast Carney's dovishness through her comments was Kristin Forbes, who voted for a rate hike in the previous two BoE rate-setting meetings and who will be stepping down from the MPC by the end of the month. Sterling maintains yesterday's momentum following her comments and was last trading at $1.2738 versus the greenback after commencing trading at $1.2681. The pound's gains extend relative to the euro as well with euro/pound at 0.8771, down from the day's open of 0.8793.

The Canadian dollar was helped by stronger-than-expected retail sales numbers and the rebound in oil to gain by 0.75% versus its US counterpart in yesterday's trading and trade below the C$1.33 handle. In today's trading, dollar/loonie is slightly down on the day at 1.3223.

The commodity-linked aussie was up four-tenths of a percent versus the greenback at $0.7568 after declining for four straight days, while the kiwi, a strong performer yesterday following the New Zealand central bank's meeting, extended gains today to rise to a four day high of $0.7289.

In commodities, gold last marginally exceeded the $1253 an ounce mark, gaining on dollar weakness. The precious metal is on its third day of advances following a downtrend starting in the first week of June that pushed it to the one-month low of $1240.74. WTI and Brent crude oil were last trading at $42.83 and $45.34 a barrel respectively, both up two-tenths of a percent, maintaining yesterday's momentum for the time being.

Regarding the rest of the day, the economic releases that are expected to attract most attention are the preliminary PMI estimates out of the eurozone and the US for the manufacturing and services sectors, as well as Canadian inflation figures and US new home sales data. Numerous speeches by FOMC members, including voting member Jerome Powell, will also be watched by forex market participants.

Cable surged above 1.2700 barrier (daily Tenkan-sen) in early Friday, driven higher by profit-taking and weaker dollar which came under pressure after US weekly jobless claims jumped above expectations on Thursday.

Sterling was in a bumpy ride during previous sessions on political uncertainty in the UK as well as conflicting comments from top BOE officials regarding possible change in the monetary policy this year.

Fresh strength emerged after repeated failure to close below pivotal 1.2625 support (Fibo 61.8% of 1.2365/1.3047 ascend) and is looking for sustained break above 1.2700/11 (Tenkan-sen / 10SMA) to resume recovery rally.

The notion is supported by RSI / slow stochastic bullish divergence, formed on daily chart.

Recovery rally also needs sustained above 1.2728 (Fibo 38.2% of 1.2955/1.2588 downleg) for confirmation and extension higher for possible retest of key barriers at 1.2800/20 zone (20SMA / last week’s multiple upside rejections / daily Kijun-sen).

Broken Tenkan-sen and session low at 1.2700/1.2674 mark solid supports which are required to hold and keep fresh bulls in play.

Res: 1.2757, 1.2771, 1.2800, 1.2815
Sup: 1.2700, 1.2674, 1.2653, 1.2625

Daily Pivots: (S1) 140.68; (P) 140.96; (R1) 141.45; More....

GBP/JPY is staying in range of 138.65/142.75 and intraday bias remains neutral. On the downside, break of 138.65 will resume the decline from 148.09. In that case, we'd look for bottoming signal around 135.58, which is close to 135.39 fibonacci level, to bring rebound. On the upside, break of 142.75 should confirm completion of the fall from 148.09 and turn bias back to the upside for this resistance.

In the bigger picture, while the fall from 148.09 is deeper than expected, we're not bearish in the cross yet. Price action from 148.42 is possibly developing into a sideway pattern with fall from 148.09 as the third leg. Deeper decline could be seen but we're looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Rise from 122.36 is still mildly in favor to resume at a later stage. However, sustained break of 135.58/39 will confirm reversal and target a retest on 122.36 low.

Daily Pivots: (S1) 123.83; (P) 124.13; (R1) 124.41; More...

Intraday bias in EUR/JPY remains neutral as the consolidation from 125.80 is still extending. In case of another fall, downside should be contained by 38.2% retracement of 114.84 to 125.80 at 121.61 to bring rebound and then rise resumption. On the upside, decisive break of 126.09 resistance will extend the whole rebound from 109.03 to 100% projection of 109.03 to 124.08 from 114.84 at 129.89.

In the bigger picture, focus is staying on 126.09 support turned resistance. Decisive break there will confirm completion of the down trend from 149.76. And in such case, rise from 109.20 is at the same degree and should target 141.04 resistance and above. Meanwhile, rejection from 126.09 and break of 114.84 will extend the fall from 149.76 through 109.20 low.

Daily Pivots: (S1) 0.8775; (P) 0.8801; (R1) 0.8818; More...

EUR/GBP is staying in consolidation from 0.8865 and intraday bias remains neutral at this point. In case of another fall, we'd expect strong support from 0.8639 to contain downside and bring rise resumption. Decisive break of 0.8851 resistance will pave the way to retest 0.9304 high. However, break of 0.8639 support will now indicate near term topping and bring deeper pull back 0.8529 resistance turned support and below.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. The leg from 0.9304 should have completed after testing 0.8332 structural support. But it's too early to say that larger rise from 0.6935 is resuming. Rejection from 0.9304 will extend the consolidation with another falling leg. Meanwhile, firm break of 0.9304 will target 0.9799 (2008 high). In case of another decline, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound.

Daily Pivots: (S1) 1.4743; (P) 1.4778; (R1) 1.4822; More...

The pull back from 1.5226 could have completed at 1.4625 after drawing support from 38.2% retracement of 1.3624 to 1.5226 at 1.4614. Further rise is mildly in favor to retest 1.5226 high. However, sustained break of 1.4614 fibonacci level will pave the way to 61.8% retracement at 1.4236 and possibly below.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 would extend to 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. However, sustained break of 1.4669 support will dampen this bullish view. We'll assess the outlook later after looking at the structure and depth of the pull back.

Daily Pivots: (S1) 1.0822; (P) 1.0847; (R1) 1.0860; More...

The break of 1.0837 suggests that correction from 1.0986 is resuming. Intraday bias is mildly on the downside for deeper fall. Still, we'd expect strong support from 1.0791/0872 support zone to bring rebound. On the upside, break of 1.0908 resistance will argue that such correction is completed and turn bias to the upside for retesting 1.0987/0999 resistance zone.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Such correction could have completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0791 support holds.