USD/CAD – Canadian Dollar Gains Ground, Investors Look for Cues

The Canadian dollar has started the new trading week with gains. In Monday’s North American session, USD/CAD is trading at 1.2915, down 0.30% on the day. There is just one event on the calendar, with US Factory Orders expected to decline 0.4%, after a strong gain of 1.6% in the previous release. On Tuesday, Canada releases Labor Productivity and the U.S publishes ISM Non-Manufacturing PMI and JOLTS Jobs Openings.

After a brief hiatus, the markets are again facing the nasty reality of a trade war between the U.S. and its major trading partners, which could be devastating news for the export-reliant Canadian economy. On Thursday, the Trump administration made good on its threats and imposed stiff tariffs on the European Union, Mexico and Canada. The U.S had granted all three trading partners a temporary extension, but cited insufficient progress on trade talks as the reason for the tariffs. There are renewed fears that these moves could trigger a global trade war. This has triggered promises of retaliatory tariffs on US products, and matters heated up on the weekend at the G-7 meeting of finance ministers in Canada. US Treasury Secretary Steve Mnuchin faced sharp criticism from other finance ministers over the tariffs. On Thursday, Canadian Prime Minister Trudeau tweeted that the tariffs were “unacceptable” and said that Canada would “impose dollar for dollar tariffs for every dollar levied against Canadians by the US.”

The U.S released strong employment numbers on Friday, but USD/CAD was unchanged on the day. Wage growth improved to 0.3%, up from 0.1% a month earlier. Nonfarm payrolls jumped from 189 thousand to 164 thousand and the unemployment rate dropped to a sizzling 3.8 percent. All three indicators beat their estimates and are indicative of a labor market running at full capacity.

The Canadian dollar was almost unchanged last week, but showed some volatility during the week. After a sharp drop on Wednesday, the currency reversed directions on Thursday, after the Bank of Canada sounded positive about the economy. The bank statement noted that inflation was higher than expected and the export sector remained robust. As expected, the bank maintained the benchmark rate at 1.25 percent. Inflation has moved closer to the BoC target of 2 percent and economic growth has been steady, so the BoC will be giving serious consideration to a rate hike this summer. Some analysts are even predicting that the bank will raise rates twice in the second half of 2018.

  Chasing One’s Tail

USD/CAD Fundamentals

Monday (June 4)

• 10:00 US Factory Orders. Estimate -0.4%

Tuesday (June 5)

• 8:30 Canadian Labor Productivity. Estimate 0.3%
• 10:00 US ISM Non-Manufacturing PMI. Estimate 57.9
• 10:00 US JOLTS Job Openings. Estimate 6.49M

*All release times are DST

*Key events are in bold

USD/CAD for Monday, June 4, 2018

USD/CAD, June 4 at 5:50 DST

Open: 1.2953 High: 1.2964 Low: 1.2905 Close: 1.2915

USD/CAD Technical

USD/CAD inched lower in the Asian session and has posted small losses in European trade

• 1.2850 is providing support
• 1.2943 was tested earlier in resistance
• Current range: 1.2850 to 1.2943

Further levels in both directions:

• Below: 1.2850, 1.2757 and 1.2614
• Above: 1.2943, 1.3015, 1.3125 and 1.3224

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Wednesday session. Currently, long positions have a majority (62%), indicative of USD/CAD continuing to move higher.

1. 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.