USD/CAD trimmed earlier gains after disappointing US retail sales

US dollar reduced gains against its Canadian counterpart on Monday, following the retail sales report from the United States, which showed that the indicator rose less than projected, bringing to life fears that economy was losing its momentum.

USD/CAD fell from a session high at 1.0434, the highest point since July 11th to reach 1.0402 during the early phase of US trade. Support was expected at July 12th low, 1.0357, while resistance was to be met at July 12th high, 1.0470.

Earlier on Monday the Department of Commerce said that retail sales in the United States rose by 0.4% to 422.79 billion USD in June, below the expected 0.7% increase, while during May sales were revised down to a 0.5% rise from 0.6% previously. It became clear that consumers spend more on gasoline and automobiles, but were less willing to spend on other types of goods. This could be a potential threat to growth, because retail sales are still a driving force of the economy. In annual terms, retail sales increased by 5.7% in June. Retail sales ex autos indicator remained without change during June on a monthly basis, opposing preliminary estimates of a 0.4% increase. This report came following the statement by FED Chairman Bernanke last week, when he said that economy was still in need of easing measures.

In addition, another report stated that the Empire State manufacturing index in the United States rose to a five-month high of 9.46 during July from 7.84 in June. Economists had projected a reading of 5.00. This index registered a value on positive territory for five months out of the past six. The indicators, tracking new orders and deliveries, recorded higher values, as well as the indicator to show expectations, regarding economic development in the next six months, which stood at a reading of 32 in July, up from 25 in June. Empire State manufacturing index is the first regional indicator, which reveals information, regarding the tendency in the US industry sector.

Meanwhile, EUR/USD pair advanced as high as 1.3054 at 13:02, following the release of the report on US retail sales. GBP/USD also advanced, reaching 1.5108 at 13:02 GMT, while USD/JPY retreated to 99.81 at 13:48 GMT.