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Reopening of non-essential stores boosted retail activity in June, with sales rising by 4.2% m/m. June's growth was a only slightly lower than Statistics Canada's preliminary estimate of 4.4% m/m. This left sales 3.5% below March level, but 8% above its pre-pandemic (February 2020) level.

Looking ahead, the agency's flash estimate suggests that retail activity decreased in July, with sales dropping by 1.7% m/m.

Regionally, sales were up in six of 10 Provinces in June, however, Ontario, where sales surged by nearly 10% on the month, accounted for the bulk of the gain. Nova Scotia (+16.3%) also posted a handsome gain following a large decline in the prior month. Gains were more modest In Quebec (+1.4%) and Alberta (+1.6%). On the flipside, sales pulled back in Saskatchewan (-1.0%), New Brunswick (-2.0%), Newfoundland and Labrador (-2.6%) and Prince Edward Island (-1.4%).

Sales of motor vehicle & parts rose for the first time since March (+2.7%), and higher prices drove sales of gasoline higher in nominal terms (+6.0%). Gasoline sales also rose in volume terms (+4.7%) consistent with improving mobility trends.

Core sales, which exclude the two above-mentioned categories, rose even more than the headline (+4.6%).

• Categories hardest hit by third-wave restrictions led the rebound. Brisk growth was reported for clothing and clothing accessories stores (+49%), and furniture and home furnishing stores (+23%).
• On the flipside, sales softened at food & beverage stores (-2.6%), electronics & appliance stores (-2.5%), and building material & garden equipment dealers (-3.1%), with the latter declining for the third consecutive month.

As consumers returned to the brick-and-mortar locations, e-commerce sales took a hit, declining by 9.2% m/m (on a seasonally adjusted basis).

Key Implications

Retail activity continues to ebb and flow consistent with the tightening and easing of the public health restrictions. As expected, easing restrictions on in-person shopping and falling case counts ushered consumers back to stores in June.

While consumers have been enjoying their newly found access to stores, they have also started shifting their spending patterns away from goods and toward services such as dining out, recreation, and travel. This transition likely weighed on retail sales in July, as indicated by the decline in the advance estimate. That said, improvement in spending on high-touch services, in addition to robust retail expenditure, bodes well for GDP growth in the third quarter.

Daily Pivots: (S1) 1.1657; (P) 1.1687; (R1) 1.1707; More...

Intraday bias in EUR/USD remains on the downside for further fall. We'd continue to look for strong support from 1.1602/1703 support zone to bring rebound. On the upside, above 1.1804 resistance will turn bias back to the upside for 1.1907 resistance first. However, sustained break of 1.1602/1703 will carry larger bearish implication and pave the way to 1.1289 fibonacci support.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally remains in favors long as 1.1602 support holds, to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again. Deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289 and below.

Daily Pivots: (S1) 1.3592; (P) 1.3675; (R1) 1.3717; More...

No change in GBP/USD's outlook and intraday bias stays on the downside for 1.3570 support. Break there will resume the fall from 1.4248 to 1.3482 resistance turned support. Firm break there will carry larger bearish implication and target 38.2% retracement of 1.1409 to 1.4248 at 1.3164. On the upside, above 1.3722 minor resistance will mix up the near term outlook and turn intraday bias neutral first.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications. However, firm break of 1.3482 will argue that the rise from 1.1409 has completed. GBP/USD would then be seen as in another leg of long term range pattern between 1.1409 and 1.4376. Deeper fall could then be seen to 61.8% retracement of 1.1409 to 1.4248 at 1.2493, and even below.

Daily Pivots: (S1) 0.9154; (P) 0.9180; (R1) 0.9215; More....

Outlook in USD/CHF remains unchanged and intraday bias remains neutral first. On the upside, break of 0.9241 resistance should resume the rise from 0.8925 through 0.9273. On the downside, break of 0.9098 will target 0.9017 support first. Further break there will likely resume the decline from 0.9471 through 0.8925 low.

In the bigger picture, the failure to sustain above 55 week EMA (now at 0.9184) retains medium term bearish in USD/CHF. Break of 0.8925 support should resume the whole decline form 1.0342 (2016 high) through 0.8756 low. However, break of 0.9273 resistance and sustained trading above 55 week EMA will be an early sign of bullish trend reversal. Focus will then turn to 0.9471 resistance for confirmation.

Daily Pivots: (S1) 109.43; (P) 109.83; (R1) 110.17; More...

Outlook in USD/JPY remains unchanged and intraday bias stays neutral first. On the upside, break of 110.79 will resume the rebound from 108.71 to retest 111.65 high. On the downside, break of 109.10 will target 108.71 support first. Firm break there will resume the decline from 111.65 and target 38.2% retracement of 102.58 to 111.65 at 108.18 next.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. The pattern from 101.18 could still extend with another falling leg. Sustained trading below 55 day EMA will bring deeper fall to 107.47 support and below. Nevertheless, strong break of 111.71 resistance will confirm completion of the corrective decline from 118.65 (2016 high). Further rise should then be seen to 114.54 and then 118.65 resistance.

Daily Pivots: (S1) 1.2709; (P) 1.2770; (R1) 1.2890; More...

Intraday bias in USD/CAD remains on the upside at this point. Current rise from 1.2005 should target for 1.3022 fibonacci level next. On the downside, below 1.2813 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Canadian Dollar is trading as the worst performing one today and slightly weaker than expected retail sales data provide little help. Persistent weakness in oil price is weighing down the loonie, together with overall negative sentiment. Overnight development is unchanged that Dollar, Yen and Swiss Franc are the strongest while commodity currencies are the weakest. Sterling is under performing both Euro and Franc too.

In Europe, at the time of writing, FTSE is down -0.11%. DAX is down -0.35%. CAC is down -0.20%. Germany 10-year yield is down -0.0032 at -0.490. Earlier in Asia, Nikkei dropped -0.98%. Hong Kong HSI dropped -1.84%. China Shanghai SSE dropped -1.10%. Singapore Strait Times rose 0.51%. Japan 10-year JGB yield dropped -0.0048 to 0.012.

Fed Kaplan might need to adjust view on tapering due to Delta

Dallas Fed President Robert Kaplan said the the economic impact from the Delta variant is "unfolding rapidly". "So far it's not having a material effect" on consumer activity, he added. But, "it is having an effect in delaying return to office, it's affecting the ability to hire workers because of fear of infection," and may be affecting production output.

Kaplan previously said he would like to start tapering asset purchases in October. But he might now need to adjust he views "somewhat" due to Delta.

Canada retail sales rose 4.2% mom in Jun, missed expectations

Canada retail sales rose 4.2% mom to CAD 56.2B in June, below expectation of 5.0% mom. Sales increased in 8 of 11 subsectors, representing 69.5% of retail trade. Core retail sales, excluding gasoline stations and motor vehicles and parts dealers, rose 4.6% mom. For Q2 as a whole, sales dropped -0.7% qoq. In the advance estimate, sales is expected to drop -1.7% mom in July.

UK retail sales dropped -2.5% mom in Jul, ex-fuel sales dropped -2.4% mom

UK retail sales dropped -2.5% mom in July, well below expectation of 0.4% mom. Ex-fuel sales dropped -2.4% mom. Over the last 12 months, retail sales rose 2.4% yoy, below expectation of 6.4% yoy. Ex-fuel sales rose 1.8% yoy.

Retail sales volumes over the last three months were up 11.1% on a year earlier.

UK Gfk consumer confidence dropped to -8

UK Gfk consumer confidence dropped slightly from -7 to -8 in August, below expectation of -6. "Against a backdrop of cooling headline inflation and soaring house prices, the U.K. consumer confidence index is stable at minus 8 this August," Joe Staton, GfK's client strategy director, said.

"Expectations for our personal financial situation for the coming 12 months are holding up and this positivity bodes well for the economy going forward this year and next," Staton said. The index measuring changes in personal finances over the past 12 months is up one point at 0.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2709; (P) 1.2770; (R1) 1.2890; More...

Intraday bias in USD/CAD remains on the upside at this point. Current rise from 1.2005 should target for 1.3022 fibonacci level next. On the downside, below 1.2813 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Economic Indicators Update

Dallas Fed President Robert Kaplan said the the economic impact from the Delta variant is "unfolding rapidly". "So far it's not having a material effect" on consumer activity, he added. But, "it is having an effect in delaying return to office, it's affecting the ability to hire workers because of fear of infection," and may be affecting production output.

Kaplan previously said he would like to start tapering asset purchases in October. But he might now need to adjust he views "somewhat" due to Delta.

Canada retail sales rose 4.2% mom to CAD 56.2B in June, below expectation of 5.0% mom. Sales increased in 8 of 11 subsectors, representing 69.5% of retail trade. Core retail sales, excluding gasoline stations and motor vehicles and parts dealers, rose 4.6% mom. For Q2 as a whole, sales dropped -0.7% qoq. In the advance estimate, sales is expected to drop -1.7% mom in July.

Full release here.

US Dollar Index

The dollar index extends gains into fifth straight day and hits new highest levels since early June on Friday.

Global risk aversion on growing fears over consequences of fresh spread of Delta variant which already caused new lockdowns in some countries and overheated situation in Afghanistan, prompted investors from riskier assets into safe-haven US dollar.

Thursday’s close above Mar 31 former high (93.45) generated strong bullish signal on formation of a double-bottom at 89.15/50 (Jan 16/May 25).

The index is on track for a weekly gains of around 1.3% (the biggest weekly advance since early June) with weekly close above 93.45 to confirm bullish signal and open way for extension towards 94.30 (Nov 4 high) and more significant obstacles at 94.66 (200DMA) and 94.75 (Fibo 38.2% of 103.80/89.15/Sep 25 high).

Overbought daily studies warn that bulls may lose traction and enter consolidation/correction before resuming.

Initial support at 93.00 zone (rising 10DMA) should keep the downside protected and guard pivotal supports at 93.45 (Aug 13/16 trough), loss of which would sideline bulls.

Res: 94.00; 94.30; 94.75; 95.00.
Sup: 93.45; 93.00; 92.45; 92.16.