CAD Struggles for Fifth Day, Jackson Hole Begins

The Canadian dollar couldn't catch a lift from upbeat risk sentiment after a dismal retail sales report. The Australian dollar was the best performer while the yen struggled broadly. The Asian session is quiet ahead of UK GDP and Jackson Hole later.

The euro was resilient once again on Thursday and USD/JPY is on the cusp of breaking 99.00 but trading was generally trendless. The exception was USD/CAD, which rose for the fifth day in a 215-pip rally. For the slow-moving pair, that's a significant move and puts it within sight of the June high of 106.10.

It has been a choppy market for months but USD/CAD has tended to trend for days at a time, including an 8-day rally in June. It's a risk to chase any five-day rally but the inability to climb alongside the commodity currencies is a sign USD/CAD could continue to rally.

Economic data from Canada is another reason for the loonie bulls to fret. June retail sales fell 0.6% compared to 0.4% expected but excluding autos the fall was 0.8% compared to a flat reading expected. That continues a run of ho-hum Canadian data. Combined with stresses in emerging markets, the outlook is worsening.

Looking ahead, the focus on Friday will be speakers at Jackson Hole. In years past, the symposium has set the Fed's fall agenda but Bernanke and most of the heavyweight central bankers won't be there with the exception of the BOJ's Kuroda. Expect him to reaffirm the BOJ will do whatever necessary to defeat deflation but that type of comment won't move the yen.

One interesting line of discussion will be QE. Economists are beginning to question the efficacy of bond buying especially in light of the financial risks. This debate is tipping toward caution and occurs mostly in academic circles so it could surge to the top of the Jackson Hole agenda and may have major monetary policy consequences deep into the future.