USD/CAD – Canadian Dollar Almost Unchanged, US Housing Report Next

The Canadian dollar is subdued in the Wednesday session, after posting considerable gains on Tuesday. Early in the North American session, USD/CAD is trading at 1.3580. We can expect the market to remain listless for the remainder of the week as we wrap up 2016. There are no Canadian events for the rest of the week. In the US, today’s sole event is Pending Home Sales. The indicator is expected to jump to 0.6%. On Thursday, the US will release unemployment claims, with the estimate standing at 277 thousand.

Canadian GDP in October was a disappointment, with a decline of 0.3%. This missed the forecast of +0.1%, marking the first contraction in the economy since May. The Canadian dollar responded with losses and the currency has dropped close to 10-month lows. Although fourth quarter growth is still projected at around 1.5 percent, economic growth remains at risk, which means that the Bank of Canada will head into 2017 with a dovish stance. The BoC lowered rates twice in 2016 in response to a weak economy and low inflation, and if things don’t improve, we could see another rate cut in the first half of 2017.

With 2017 just around the corner, US consumers are brimming with confidence, in what analysts are describing as a post-election surge in optimism. The CB Consumer Confidence report surged in December to 113.7, its highest level since August 2001. This reading comes on the heels of UoM Consumer Sentiment, which climbed to a 12-year high, with a reading of 93.8 points. Clearly, consumers are optimistic that the economy will continue to improve under Donald Trump. Both of these well-respected surveys found that consumers are confident that continuing economic growth will create new jobs and raise incomes. Trump’s economic platform remains short on details, but he has promised to cut taxes while increasing public spending. If Trump manages to implement both of these goals, the US economy could heat up and also help global growth pick up speed. In late November, the OECD revised upwards its 2017 growth projections for the US from 2.1% to 2.3%.

The US economy continues to impress, as underscored by the most recent revision to third quarter GDP. The Final GDP reading of 3.5% beat the estimate of 3.3%. This figure marked an upward revision of the previous GDP estimate of 3.2%. The stellar reading can be attributed to stronger consumer spending and an increase in business investment, and marked the strongest growth rate since the third quarter of 2015. With consumer confidence at high levels and the labor market close to capacity, fourth quarter GDP readings could follow suit with strong numbers.

USD/CAD Fundamentals

Wednesday (December 28)

• 10:00 US Pending Home Sales. Estimate 0.6%

Thursday (December 29)

• 8:30 US Unemployment Claims. Estimate 277K
• 11:00 US Crude Oil Inventories

*All release times are EST

*Key events are in bold

USD/CAD for Wednesday, December 28, 2016

USD/CAD December 28 at 8:35 EST

Open: 1.3576 High: 1.3585 Low: 1.3557 Close: 1.3584

USD/CAD Technical

• USD/CAD has been flat in the Asian and European sessions
• 1.3457 is providing support
• 1.3589 is under pressure in resistance

Further levels in both directions:

• Below: 1.3457, 1.3371, 1.3253 and 1.3120
• Above: 1.3589, 1.3759 and 1.3889
• Current range: 1.3457 to 1.3589

OANDA’s Open Positions Ratio

USD/CAD ratio is showing short positions with a majority (61%). This is indicative of trader bias towards USD/CAD breaking out and moving lower.

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