USD/CAD – Canadian Dollar Under Pressure at 1.34

USD/CAD has inched higher in the Monday session. Currently, the pair is trading slightly below the 1.34 line. On the release front, it’s a very quiet start to the week. There are no Canadian events on the schedule. The US will release Factory Orders, with the indicator expected to dip to 1.1%. On Tuesday, Canada releases trade balance and Ivey PMI.

The US dollar posted broad gains last week, and the Canadian dollar also took it on the chin, dropping 1.9 percent. Canadian GDP expanded 0.3% in January, matching the forecast. Still, this figure was lower than the December reading of 0.4%. As expected, the Bank of Canada held the benchmark rate at 0.50%, but a pessimistic rate statement weighed on the Canadian currency last week.  The rate statement noted that the economy faces “significant uncertainties”, including a lack of clarity over Donald Trump’s economic agenda. Trump has called for the NAFTA trade agreement to be scrapped, although he has since backtracked and said that he only wanted to “tweak” the provisions that affect Canada-US trade. Still, Trump’s protectionist stance could hit the Canadian economy hard, as Canada sends 80% of its exports to its southern border. Even if the US does not alter NAFTA, the US could slap import duties on Canadian products, which would have negative ramifications for the Canadian economy.

As the US economy continues to fire on all four cylinders, market sentiment has heated up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move, as the Fed holds its policy meeting on March 15. FOMC members William Dudley and John Williams recently hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets are taking these statements at face value, sending the odds of a March move soaring upwards. The likelihood of a rate this month has jumped to 80%, compared to 33% just a week ago. Why the huge jump in odds? One reason is that policymakers are now saying they won’t wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

USD/CAD Fundamentals

Monday (March 6)

• 10:00 US Factory Orders. Estimate 1.1%
• 15:00 US FOMC Member Neel Kashkari Speech

Tuesday (March 7)

• 8:30 Canadian Trade Balance. Estimate 0.2B
• 10:00 Canadian Ivey PMI. Estimate 58.9B

*All release times are GMT

*Key events are in bold

USD/CAD for Monday, March 6, 2017

USD/CAD March 6 at 8:00 EST

Open: 1.3382 High: 1.3415 Low: 1.3371 Close: 1.3397

USD/CAD Technical

• USD/CAD was flat in the Asian session and has showed little movement in European trade
• 1.3371 is under pressure in support
• 1.3461 is the next resistance line

Further levels in both directions:

• Below: 1.3371, 1.3253, 1.3120 and 1.3003
• Above: 1.3461, 1.3551 and 1.3672
• Current range: 1.3371 to 1.3551

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Monday session. Currently, long positions have a strong majority (70%), 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.