USD/CAD – Canadian Dollar Dips Ahead of BoC Rate Decision

The Canadian dollar has reversed directions and recorded losses in the Wednesday session. Early in North American trade, USD/CAD is trading slightly above the 1.31 line. On the release front, US inflation data matched expectations. Later in the day, the Bank of Canada will release its benchmark rate. The rate has been pegged at 0.50% since July 2015, and with plenty of slack in the Canadian economy, no change is expected the upcoming rate announcement.

US inflation numbers remained steady in December. CPI, the primary gauge of consumer inflation, edged up to 0.3%, while Core CPI remained unchanged at 0.2%. Both indicators matched the forecasts. Inflation levels are close to the Federal Reserve’s target of two percent, which means that policymakers will likely stick to their plan of gradual, modest rate hikes in 2017. However, the Fed is not expected to raise rates at its next meeting on February 1, given the quarter-point hike in December.

Donald Trump hasn’t yet assumed the reins of office, but his comments earlier this week sent the US dollar broadly lower. In an interview with the Wall Street Journal on Monday, Trump complained that the currency was “too strong”. These sentiments were echoed on Tuesday by Trump advisor Anthony Scaramucci. Speaking at the World Economic Forum in Davos, Scaramucci warned that “we must be careful of a rising dollar.” Trump broke with the unwritten rule that US presidents refraining from commenting on the US dollar, and his comments could be a taste of more to come, as Trump is unlikely to veer from his habit of making controversial comments.

Trump Deflates USD Ahead of Inflation Data

USD/CAD Fundamentals

Wednesday (January 18)

• 8:30 US CPI. Estimate 0.3%
• 8:30 Core CPI. Estimate 0.2%
• 10:00 BoC Monetary Policy Report
• 10:00 BoC Rate Statement
• 10:00 BoC Overnight Rate. Estimate 0.50%
• 11:15 BoC Press Conference
• 9:15 US Capacity Utilization Rate. Estimate 75.6%
• 9:15 US Industrial Production. Estimate 0.8%
• 10:00 US NAHB Housing Market Index. Estimate 69 points
• 11:00 US FOMC Member Neel Kasharki Speech
• 14:00 US Beige Book
• 15:00 US Federal Reserve Chair Yellen Speech
• 16:00 US TIC Long-Term Purchases. Estimate 21.3B

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, January 18, 2017

USD/CAD January 18 at 8:50 EST

Open: 1.3062 High: 1.3120 Low: 1.3046 Close: 1.3112

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted gains in the European session
• 1.3003 has switched to a support role
• 1.3120 is under pressure in resistance

Further levels in both directions:

• Below: 1.3003, 1.2922 and 1.2815
• Above: 1.3120, 1.3253, 1.3371 and 1.3457
• Current range: 1.3003 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio continues to show gains in long positions in the Wednesday session. Currently, long positions have a majority (65%), indicative of trader bias towards USD/CAD continuing to move higher.

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.