FED: Discount Window Usage Continues To Creep Up (2/2)

StatCan's advance estimate for April wholesale and manufacturing sales suggested weakness at the start of Q2, ahead of Friday's Q1 GDP release.

• Wholesale sales (ex-petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain) fell an estimated 0.9% M/M (seasonally-adjusted), reflecting "lower sales in the motor vehicle and motor vehicle parts and accessories subsector", per Tuesday's release. That would be the biggest decline since May 2024, following 7 consecutive monthly increases. It would bring the 3M/3M annualized rate down to 7.8%, versus 9-11% in the first three months of the year.
• This follows Monday's advance estimate for manufacturing sales, which showed a 2.0% M/M decline ("the largest decreases were in the petroleum and coal product subsector and motor vehicle industry group") for the third consecutive monthly drop.
• The deceleration in momentum is even more pronounced here than in wholesales: the monthly drop would be the biggest in 18 months and brings sales back down to levels last seen 7 months earlier, with 3M/3M annualized sales also falling 2.0% (the first decline since October 2024 and comparing to +6.7% at the end of Q1).
• As such, the estimate is indicative of a reversal of activity following a tariff-boosted first quarter, which may bode poorly for the April GDP prelim estimate due at the end of the week alongside Q1 GDP data.
• That said, the advance estimate of retail sales for April out last week  is for 0.5% nominal M/M growth (still slower 3M/3M momentum at 2.6%, weakest since Aug 2024), suggesting that while the labor market and confidence remained soft at the start of Q2, consumer demand hasn't necessarily dropped along with it.

The dollar (Bloomberg Dollar Index) picks up just under 0.1% at session end to its highest since May22/23 overnight (1217.09), last up 0.5% on the day.

• Leading the latest move is USDCAD which has risen 0.25% in the last 20 minutes, to a session high 1.3836, reversing the fall since Friday morning and now up 1.1% from Monday's low. No headline catalysts are evident.
• On the day, CAD is just behind the Scandis and the JPY (1.5% weaker) in terms of weakness versus USD.
• As just published by our tech analyst, first resistance is at 1.3882 (20-day EMA), with next at 1.3984/1.4016 (50-day EMA / High May 12 and 13).                                                                                                                                                                                                                        

• RES 4: 1.4200 Round number resistance
• RES 3: 1.4111 High Apr 4
• RES 2: 1.3984/1.4016 50-day EMA / High May 12 and 13
• RES 1: 1.3882 20-day EMA
• PRICE: 1.3777 @ 07:58 BST May 27
• SUP 1: 1.3686 Low May 26   
• SUP 2: 1.3643 Low Oct 9 ‘24
• SUP 3: 1.3579 1.500 proj of the Feb 3 - 14 - Mar 4 price swing 
• SUP 4: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing 

A downtrend in USDCAD remains intact despite Tuesday’s strength and the latest move down reinforces this theme. The pair has traded through support at 1.3751, the May 6 low. This confirms a resumption of the downtrend and maintains the sequence of lower lows and lower highs. Scope is seen for an extension towards the 1.3600 handle while further out, the move down opens 1.3420, the Sep 25 ‘24 low. Initial resistance is 1.3882, the 20-day EMA.