USD/CAD – Canadian Dollar Listless Ahead of US Durables

The Canadian dollar is almost unchanged on Wednesday. Currently, USD/CAD is trading at 1.3220. In the US, today’s key events are durable goods orders. The markets are bracing for a decline from Core Durable Goods Orders, with an estimate of -0.5%. As well, Federal Reserve chair Janet Yellen will testify before the House Committee on Financial Services. There are no Canadian releases on the schedule. On Thursday, the US will release Final GDP and unemployment claims.

The Canadian dollar continues to struggle, as USD/CAD remains above the 1.32 level. USD/CAD touched 1.3275 on Tuesday, as the Canadian dollar slumped to its lowest level since March. The slide started after weak Canadian consumer indicators on Friday. Core Retail Sales was the biggest disappointment, as the market forecast of +0.5% was dashed by a weak reading of -0.1%. Core CPI remained stagnant at 0.0% for a third straight month, underscoring persistent low inflation levels. The BoC has stated its concerns about weak inflation, and these soft releases will add pressure on the bank to consider reducing interest rates at its October policy meeting. The Canadian dollar is sensitive to oil price movement, and with OPEC members holding an informal meeting on Wednesday in Algiers, we could see some volatility from crude which could affect the movement of USD/CAD.

US consumer confidence numbers continue to impress the markets. The CB Consumer Confidence jumped to 104.1 points in September, much higher than the forecast of 98.6 points. This excellent release improved upon a strong August report of 101.1 points. Stronger consumer confidence often translates into increased spending by consumers, which is vital for economic growth. If consumer spending numbers also move higher, the likelihood of a December hike will likely increase.

Federal Reserve chair Janet Yellen will testify before a Congressional committee on Thursday, and her remarks could shed more light on the Fed’s plans regarding a rate hike. Last week, the Fed held interest rates at 0.25%. The Fed policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike. Currently, a rate hike is priced in at 44 percent, but plenty can happen before the December policy meeting (the Fed is unlikely to make a move in November, just ahead of the US presidential election). The Fed has consistently stated that the next rate hike will be data-dependent, which means that stronger economic numbers, especially on the inflation front, will increase the likelihood of a December hike.

USD/CAD Fundamentals

Wednesday (September 28)

• 8:30 US Core Durable Goods Orders. Estimate -0.5%
• 8:30 US Durable Goods Orders. Estimate -1.0%
• 10:00 US Fed Chair Janet Yellen Testifies
• 10:10 US FOMC Member James Bullard Speaks
• 10:30 US Crude Oil Inventories. Estimate 2.4M
• 19:15 US FOMC Member Esther George Speaks

Thursday (September 29)

• 8:30 US Final GDP. Estimate 1.3%
• 8:30 US Unemployment Claims. Estimate 260K
• 16:00 US Federal Reserve Chair Janet Yellen Speaks

* Key releases are in bold

*All release times are EDT

USD/CAD for Wednesday, September 28, 2016

USD/CAD September 28 at 8:20 GMT

Open: 1.3209 High: 1.3235 Low: 1.3193 Close: 1.3220

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted small gains in European trade
• 1.3120 is providing strong support
•  1.3253 is a weak resistance line

Further levels in both directions:

• Below: 1.3120, 1.3028, 1.2922 and 1.2815
• 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 Wednesday session. Currently, short positions have a strong majority (64%), indicative of trader bias towards USD/CAD continuing to move downwards.

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