Yen Declines On Worse-Than-Expected May Retail Sales Data

Yen Declines On Worse-Than-Expected May Retail Sales Data
June 30, 2020

 

The Canadian dollar rallied against the yen yesterday following the release of upbeat building permits in May. The yen’s decline was also aided by the worse-than-anticipated May retail sales data published in the Asian session. In the past 24 hours, the CAD/JPY pair has rallied from a low of 78.20 to a high of 78.86.

According to the Japanese Ministry of Economy, Trade and Industry, retail sales declined 12.3% y-o-y in May, after contracting by 13.9% in the earlier month. Economists had anticipated retail sales to decline by 11.6%. On a m-o-m basis, Japan’s retail sales grew 2.1% in May, while economists had expected an increase of 3%.

In the US session, data published by Statistics Canada indicated that building permits increased 20.2% m-o-m in May, following a drop of 15.4% in April and almost twice the 10.3% increase anticipated by analysts. In March, building permits declined by 13.4%. In value terms, building permits in May was C$7.40 billion ($5.42 billion). It was the largest percentage rise since March 2009, concurring with the easing of COVID-19 limitations in Quebec, Ontario, and Prince Edward Island. Still, the May reading is 20.4% lower than the previous peak recorded in January 2020.

The total value of residential permits increased in six provinces in May, rising 18.7% to $4.80 billion across the country.  Quebec recorded the largest increase of 53.4% for the reported month. The value of commercial permits increased 20.8% to $1.50 billion in May, with the most significant increases posted in Quebec (147.8%) and Ontario (26.3%).

Industrial permits soared 57.6% to $600 million, following a sharp decline in April. The increase was mainly led by a permit for a Molson brewery in Montreal. More importantly, institutional permits recorded their first gain for 2020, rising 2.8% to $544 million.

In another news release, Statistics Canada stated that the industrial product price index (IPPI) increased 1.2% m-o-m in May, following a 2.3% contraction in the earlier month. Economists had anticipated a gain of 2.7%. Meat, fish, and dairy products contributed to the increase in the IPPI of May. It is the first increase after four successive months of decrease. Moreover, it is the first increase this year. Excluding energy and petro products, the IPPI rose 0.8%.

While the price of meat, fish, and dairy products increased 8.3%, meat products recorded an increase of 13.3%. Specifically, fresh and frozen pork posted a 31.3% increase in price, reflecting the largest monthly gain. Interruptions in the supply chain due to the COVID-19 pandemic and a rise in demand for meat products were responsible for the increase in commodity group. The IPPI also spiraled upwards due to an increase in the price of energy and petro products in May.

In the same report, the statistical organization has revealed that the raw materials price index (RMPI) increased 16.4% m-o-m in May, after decreasing 13.4% in the earlier month. Economists had anticipated the RMPI to increase by 29.7%. It was the first increase after four consecutive months of decrease. With a 73.5% increase, crude and energy product growth led the increase in the RMPI. Specifically, crude oil posted a record monthly increase of 81.8%. The product cut agreements between OPEC+ and Russia aided the increase. The rally was also supported by easing of COVID-19 related restrictions. Excluding crude energy products, the RMP rose 1.8%. Likewise, animals and animal product prices recorded a gain of 4.1%, with hogs posting a 21% increase.

The weak data from Japan and mixed data from Canada is expected to keep the CAD/JPY pair range-bound with slight bullish bias in the short-term.

The historical price chart indicates that the CAD/JPY pair is ascending after testing support at 78.40. The next resistance is anticipated only near 79.60. Additionally, the stochastic oscillator is in the bullish zone. Therefore, the currency pair is anticipated to rally further in the short term.

CAD - technical analysis - 30th June 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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