USD/CAD – Loonie Ticks Higher, Canadian Housing Report Next

The Canadian dollar has posted small gains on Thursday, as USD/CAD trades at 1.3050. On the release front, Canada will release the New Housing Price Index, with the markets braced for a weak gain of 0.2%. Today’s key event is US Unemployment Claims, with the indicator expected to edge higher to 272 thousand. On Friday the US will release CPI and Retail Sales reports, as well as the UoM Consumer Sentiment report.

The Canadian dollar has posted strong gains this week, as oil prices rose to 2-week highs on Tuesday, courtesy of OPEC. The oil cartel, which has been hit hard by low oil prices, has again floated the idea of a freeze in output in order to stabilize oil prices. Venezuela, Ecuador and Kuwait are pushing the idea, but Russia is so far non-committal to implementing a freeze. OPEC members will meet in late September in Algiers. If recent history is any indication, an agreement will be difficult to reach. OPEC members attempted to freeze output earlier in the year, but could not reach an agreement as Iran refused to climb on board. The meeting resulted in significant volatility in oil prices, and if the trend repeats itself in the September summit, we could see some volatility from the Canadian dollar around the time of the OPEC meeting.

US employment numbers impressed in July, led by a banner Nonfarm Payrolls report. The July indicator surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. This release follows the outstanding June reading of 280 thousand. US wage growth has been a soft spot in the robust labor market, but there was positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. As well, Unemployment Claims remained steady at 4.9%. What will the Federal Reserve do with these numbers? Prior to the payrolls release, a September hike was virtually off the table, especially in light of the soft US GDP report in late July. The Fed has made no secret of the fact that any rate move will be data-dependent, and the stellar job numbers will force the Fed to give serious thought to a move in September. Employment and inflation releases in the next few weeks will be critical factors in determining if the Fed makes a move next month, or waits until December before revisiting the rate question.

USD/CAD Fundamentals

Thursday (August 11)

• 8:30 Canadian NHPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 272K
• 8:30 US Import Prices. Estimate -0.2%
• 10:00 US Mortgage Delinquencies
• 10:30 US Natural Gas Storage. Estimate 24B
• 13:01 US 30-year Bond Auction

* Key releases are in bold

*All release times are GMT

USD/CAD for Thursday, August 11, 2016

USD/CAD August 11 at 11:45 GMT

Open: 1.3058 High: 1.3080 Low: 1.3026 Close: 1.3050

USD/CAD Technical

• USD/CAD has shown limited movement in the Asian and European sessions
•  1.2990 is providing support
•  1.3081 was under strong pressure in resistance earlier and is a weak line. It could see further action in the North American session

Further levels in both directions:

• Below: 1.2990, 1.2900 and 1.2780
• Above: 1.3081, 1.3219 and 1.3353
• Current range: 1.2990 to 1.3081

OANDA’s Open Positions Ratio

USD/CAD ratio is showing long positions with a strong majority (58%), indicative of trader bias towards USD/CAD reversing directions and moving to lower levels.

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