USD/CAD – Loonie Edges Lower, Canadian Building Permits Next

USD/CAD has posted slight gains on Thursday, as the pair trades at the 1.32 line. On the release front, Canada will release Building Permits, with the indicator expected to climb 1.1%. Over in the US, today’s key event out of the US is Unemployment Claims. On Friday, the spotlight will be on employment numbers on both sides of the border. The US will release three key employment indicators – nonfarm employment change, average hourly earnings and the unemployment rate. Canada will release employment change and the unemployment rate.

The ADP payroll report was a disappointment, dropping to 154 thousand, its lowest gain since February 2014. With the odds of a December rate hike priced in at about 55%, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the US dollar could pick up some ground against the yen. On the other hand, Nonfarm Employment Change plunged in August and missed expectations. If that occurs again in the September reading, the dollar could drop and the Fed might get cold feet and decide not to raise rates at the December policy meeting.

The Fed remains divided over the timing of a rate hike, and this was underscored at the September meeting, when three of the ten FOMC members voted against the decision to hold rates at 0.25%, voting instead in favor of an immediate rate hike. On Tuesday, FOMC member Jeffrey Lacker, one of seven non-voting members, said that he would have voted in favor of a rate hike at the last meeting had he been able to vote. The strong dissent in the September rate decision has not helped the credibility of the Fed, which had promised a series of rate hikes in 2016, but has opted for the sidelines since its quarter-point hike last December. Continuing mixed messages from the Fed make it difficult for the markets to ascertain what the Fed has planned regarding monetary policy and whether it will press the rate trigger in December or wait until next year.

USD/CAD Fundamentals

Thursday (October 6)

• 7:30 US Challenger Job Cuts
• 8:30 Canadian Building Permits. Estimate 1.1%
• 8:30 US Unemployment Claims. Estimate 255K
• 10:30 US Natural Gas Storage. Estimate 67B
• 11:50 BOC Senior Deputy Governor Carolyn Wilkins Speaks

Upcoming Key Events 

Friday (October 7)

• 8:30 Canadian Employment Change. Estimate 8.5K
• 8:30 Canadian Unemployment Rate. Estimate 7.0%
• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 171K
• 8:30 US Unemployment Rate. Estimate 4.9%

* Key releases are in bold

*All release times are EDT

USD/CAD for Thursday, October 6, 2016

USD/CAD October 6 at 8:20 GMT

Open: 1.3177 High: 1.3209 Low: 1.3171 Close: 1.3209

USD/CAD Technical

• USD/CAD has edged higher in the Asian and European sessions
• 1.3120 is providing support
•  There is resistance at 1.3253

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 showing little movement on Thursday. Long positions have a strong majority (61%), indicative of trader bias towards USD/CAD continuing to move upwards.

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