USD/CAD – Canadian Dollar Edges Up, Fed Rate Decision Ahead

The Canadian dollar has edged higher in the Monday session. In North American trade, USD/CAD is trading at 1.3119. On the release front, it’s a very quiet start to the week, with just two minor US events. There are no Canadian events until Thursday.

It was a second straight winning week for the Canadian dollar, which has improved to 7-week highs. Given that the currency is sensitive to oil prices, much of the currency’s improvement can be attributed to the recent surge in oil prices. OPEC members agreed to cut production earlier this month and proceeded to reach another a production agreement with Russia and other oil exporters on Saturday. The agreement between OPEC and non-OPEC oil exporters was the first since 2001, and could propel crude prices even higher.

The Federal Reserve will be front and center this week, as the Fed meets for its monthly policy meeting. This will be the first meeting after Donald Trump’s election as president. More importantly of course, the markets have priced in a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and anticipation of a hike has translated into strong gains for the greenback. With Trump taking the reins in government in January, it will be interesting to see what happens early next year. Trump has stated that he plans to increase government spending and cut taxes, which could lead to higher inflation levels. The Fed has indicated that it plans to raise rates gradually in 2017, but this could change once the new administration’s economic policies become clearer.

USD/CAD Fundamentals

Monday (December 12)

• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -99.5B

*All release times are EST

*Key events are in bold

USD/CAD for Monday, December 12, 2016

USD/CAD December 12 at 9:15 EST

Open: 1.3131 High: 1.3144 Low: 1.3111 Close: 1.3126

USD/CAD Technical

• USD/CAD was flat in the Asian and European sessions. The pair has shown limited movement early in the North American session
• 1.3120 remains under pressure and could break in the North American session.
• 1.3253 is a strong resistance line

Further levels in both directions:

• Below: 1.3120, 1.3026 and 1.2951
• Above: 1.3253, 1.3371, 1.3457 and 1.3551
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio has shown some movement towards long positions. Currently, long positions have a majority (57%), indicative of trader bias towards USD/CAD reversing directions and moving higher.

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