USD/CAD vulnerable to Tuesday's data

The main event in North American trading on Tuesday is the Canadian retail sales report for June.

It's normally not a huge market mover but USD/CAD is vulnerable at the moment. On Friday, Canadian CPI numbers were only fractionally higher than anticipated and yet the pair fell a full cent.

Monday's trading may have even been more telling as USD/CAD remained at the lows despite a 2.3% drop in oil prices.

Those are both negative signs for USD/CAD and I suspect that even a slightly strong retail sales report will lead to another outside drop in the pair. The consensus is for a 0.2% rise overall but estimates range from -0.4% to +0.5%. Excluding autos, the consensus is +0.1% with estimates from -0.6% to +0.5%.

The USD/CAD chart shows what's at stake. The pair would signal an end to the retracement phase if it falls below the 61.8% level of the August rally.

In the bigger picture, that would mean just a 400 pips bounce after a 1400 pip move down. That's the kind of shallow bounce that means more pain ahead.