USD/CAD – Canadian Dollar Dips Ahead of Fed Minutes

USD/CAD has posted gains in the Tuesday session. Early in North American trade, the pair is trading at 1.3130. On the release front, there are no Canadian events on the schedule. The US will release Flash Manufacturing and Service PMIs. On Wednesday, Canada releases Core Retail Sales, with the markets expecting a strong gain of 0.8%. In the US, the Federal Reserve will publish the minutes of the January policy meeting.

Canadian indicators started the week on a positive note, as Wholesale Sales in December jumped 0.7%, above the forecast of 0.3%. More good news is expected from Core Retail Sales on Wednesday, with an estimate of 0.8%. The week wraps up with CPI, which has posted two straight declines, as inflation levels remain weak. However, the markets are expecting a 0.3% gain in the January report. If these key indicators match or beat their estimates, the Canadian dollar could get a boost against the greenback.

After Fed Chair Janet Yellen’s upbeat take on the US economy, the markets are keen to review the Fed policy minutes, which will be released on Wednesday. Testifying before Congress last week, Yellen noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. Yellen strongly hinted that a rate hike was imminent, leaving the markets to speculate if the Fed prefers to make a move in March or June. If the US economy stays on track in 2017, analysts expect two or three rate hikes of a quarter-point. At the same time, the Fed wants to take into account the economic stance of the new administration, but this remains an elusive goal. Donald Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump has fired back by bitterly attacking the media, and lost in the mayhem is a clear and coherent economic policy. Although Trump has been in office for just over a month, the perception of a muddled and disoriented White House is creating uncertainty in the markets, and is, as Trump would say, “bad for business”.

USD/CAD Fundamentals

Tuesday (February 21)

• 8:50 US FOMC Member Neel Kashkari Speech
• 9:45 US Flash Manufacturing PMI. Estimate 54.7
• 9:45 US Flash Services PMI. Estimate 55.8
• 12:00 US FOMC Member Patrick Harker Speech

Wednesday (February 22)

• 8:30 Canadian Core Retail Sales. Estimate 0.8%
• 10:00 US Existing Home Sales. Estimate 5.55M
• 14:00 US FOMC Minutes

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, February 21, 2017

USD/CAD February 21 at 9:10 EST

Open: 1.3104 High: 1.3164 Low: 1.3102 Close: 1.3134

USD/CAD Technical

• USD/CAD edged higher in the Asian session. In European trade, the pair posted slight gains but then retracted. USD/CAD is steady early in North American trade
• 1.3120 has switched to a support role after gains by USD/CAD. It is a weak line
• 1.3253 is the next line of resistance

Further levels in both directions:

• Below: 1.3120, 1.3003, 1.2922 and 1.2815
• Above: 1.3253, 1.3371 and 1.3461
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio continues to show gains in short positions in the Tuesday session. Currently, long positions have a majority (56%), indicative of trader bias towards USD/CAD continuing to move higher.

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