USD/CAD – Canadian Dollar Dips, Canadian Manufacturing Sales Next

The Canadian dollar has lost ground on Friday, erasing the gains which marked the Thursday session. Currently, USD/CAD is trading at the 1.32 level. The week wraps up with key events in Canada and the US. Canada will publish Manufacturing Sales, with an estimate of a 0.6% gain. In the US, consumer indicators will be in the spotlight today, with the release of CPI and the UoM Consumer Sentiment report. The estimate for CPI is a weak gain of 0.1%, and UoM Consumer Sentiment is expected to improve slightly to 91.0 points.

The Canadian dollar has lost 1.1% in value this week, as USD/CAD continues to rise and pushed above the 1.32 level on Friday. As the Canadian currency is sensitive to the price of oil, a sharp drop of 5% in crude oil prices this week has weighed on the struggling loonie. Oil prices headed downwards earlier in the week, following an International Energy Agency (IEA) report that the global oversupply of oil could extend into the middle of 2017. This assessment surprised the markets, as the IEA veered sharply from its report a month ago, when it projected that the market would not show any surplus for the rest of the year. The revised IEA report comes on the heels of an OPEC report on Monday, which projected the oil glut to continue into 2017 due to an increase in production from non-OPEC members. If oil prices continue to drop, the Canadian dollar could continue to lose ground.

The Canadian dollar gained some ground on Thursday, taking advantage of soft US retail sales reports in August. Retail Sales, the primary gauge of consumer spending, declined 0.3% in August, marking its first decline in five months. There was no relief from Core Retail Sales, which fell 0.1% and missed expectations. These weak numbers, which point to softer spending by the US consumer, have reduced the likelihood of rate hike in 2016 – a September hike is currently priced in at 12%, while the likelihood of a December move has fallen to 40%. These numbers will likely shift after the release of CPI and consumer confidence numbers on Friday, but it appears a safe bet that a September rate hike is off the table.

With a crucial Federal Reserve policy meeting on September 21, the Fed has imposed a blackout period on public comments from FOMC members. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. FOMC member Eric Rosengren recently came out in support of a rate hike, saying that “tightening is likely to be appropriate”, and went as far as to say that the US economy could overheat if the Fed didn’t act soon. Earlier this week, FOMC member Lael Brainard sounded much more cautious, saying it would be prudent to maintain a loose monetary policy. Brainard noted global uncertainties and weak inflation as reasons for the Fed not to rush into raising rates.

USD/CAD Fundamentals

Friday (September 16)

• 8:30 Canadian Manufacturing Sales. Estimate 0.6%
• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 91.0
• 10:00 US Preliminary UoM Inflation Expectations
• 16:00 US TIC Long-Term Purchases. Estimate 30.2B

* Key releases are in bold

*All release times are EDT

USD/CAD for Friday, September 16, 2016

USD/CAD September 16 at 6:55 GMT

Open: 1.3158 High: 1.3210 Low: 1.3139 Close: 1.3204

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted considerable gains in European trade
•  1.3120 is providing support
• There is resistance at 1.3253

Further levels in both directions:

• Below: 1.3120, 1.3028 and 1.2922
• Above: 1.3253, 1.3371 and 1.3457
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Friday session. Currently, short positions have a strong majority (68%), indicative of trader bias towards USD/CAD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.