• The US dollar appreciates again on Friday and approaches 1.3800.
• A mixed US Retail Sales report has been overlooked.
• USD/CAD seen appreciating beyond 1.4000 – TDS.

The US dollar firmed up on Friday to retrace most of the previous day’s losses. The pair has reached a session high at 1.3875, after bouncing near 1.3700 earlier today, and is on track to close the week with a moderate advance.

Subdued reaction to a mixed retail sales report

The greenback has been little changed by the release of a mixed consumption report. Retail sales remained flat in September, against expectations of a 0.2% monthly increase, in a sign that higher food and energy prices might be starting to bite into the cash available for big-ticket purchases.

Consumption data, however, has also shown some positive aspects. The core retail sales (excluding automobiles) increased against expectations at a 0.1% pace.

Beyond that, the USD ends the week in a positive tone, following the strong US inflation figures seen on Thursday, which have boosted expectations for the fourth 0.75% rate hike at November’s monetary policy meeting.

USD/CAD could easily appreciate beyond 1.40 – TDS

Currency analysts at TD Securities see the CAD dropping further which might push the pair beyond 1.40: Even if the next phase of USD strength is not as linear as it has been for much of this year, there is a lot of negative idiosyncratic risk coming the CAD's way with the debt servicing problem for households only in the early days (…) While we have forecast 1.40 into year-end, it is no ceiling and it could very easily get worse for the CAD.”

Technical levels to watch