USD/CAD – Canadian dollar continues to drift, BoC expected to raise rates

The Canadian dollar is trading sideways on Tuesday. Currently, USD/CAD is trading at 1.3106, up 0.04% on the day. On the release front, there are no Canadian events. In the U.S, the Richmond Manufacturing Index is expected to drop to 25 points. On Wednesday, the Bank of Canada is expected to raise the benchmark rate to 1.75%.

All eyes are on the Bank of Canada, which holds its policy meeting on Wednesday. The BoC has raised rates twice this year, and a third hike would raise rates to 1.75%, which would be the highest level since October 2008. This meeting is the first since Canada signed on to a new trade agreement with Mexico and the United States, which should provide a boost to the economy and calm investor jitters. The Federal Reserve raised rates in September and is expected to do repeat in December, so a BoC rate hike will help keep the Canadian dollar attractive to investors.

Relations between the U.S and China remain tenuous, with the markets nervous that the trade war could worsen. The U.S Treasury Department released its semi-annual report on foreign exchange rates on Thursday, and there was some relief in the markets as the report did not name China as a currency manipulator. Still, the report said that the U.S was “deeply disappointed’ with that China refuses to disclose the extent of its foreign currency intervention. The Chinese yuan has slipped some 9 percent since April, and U.S officials are concerned that China has deliberately weakened the currency in order to counter U.S tariffs on Chinese goods, and will continue to monitor China’s currency practices.

Desperately seeking stability

Commodities Weekly: Oil at five-week low on uncertain demand outlook

Markets remain shrouded in a thick blanket of risk.

USD/CAD Fundamentals

Tuesday (October 23)

• 10:00 US Richmond Manufacturing Index. Estimate 25
• 13:30 US FOMC Member Bostic Speaks

Wednesday (October 24)

• 9:00 US HPI. Estimate 0.3%
• 9:45 US Flash Manufacturing PMI. Estimate 55.5
• 9:45 US Flash Services PMI. Estimate 54.1
• 10:00 BoC Monetary Policy Report
• 10:00 BoC Rate Statement
• 10:00 BoC Overnight Rate. Estimate 1.75%
• 10:00 US New Home Sales. Estimate 630K
• 10:30 US Crude Oil Inventories
• 11:15 BoC Press Conference
• 13:00 US FOMC Member Raphael Bostic Speaks
• 13:10 US FOMC Member Loretta Mester Speaks
• 14:00 US Beige Book

*All release times are DST

*Key events are in bold

USD/CAD for Tuesday, October 23, 2018

USD/CAD, October 23 at 7:45 DST

Open: 1.3101 High: 1.3147 Low: 13082 Close: 1.3106

USD/CAD Technical

USD/CAD showed limited movement in the Asian session and the trend has continued in European trade

• 1.3067 is providing support
• 1.3198 is the next resistance line
• Current range: 1.3067 to 1.3198

Further levels in both directions:

• Below: 1.3067, 1.2970, 1.2831 and 1.2733
• Above: 1.3198, 1.3292 and 1.3387

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