USD/CAD – Canadian Dollar Edges Higher on Mixed Construction Numbers

The Canadian dollar has edged higher on Tuesday, erasing the losses from the Monday session. Early in the North American session, USD/CAD is trading at 1.3230. On the release front, Canadian Housing Starts climbed to 207 thousand, well above the forecast of 187 thousand. Building Permits disappointed, with a decline of 0.1%, compared to the estimate of a 2.4% gain. Later in the day, the US releases JOLTS Job Openings, which is expected to climb to 5.59 million. On Wednesday, we’ll get a look at the weekly Crude Oil Inventories.

Canada and the US released key employment numbers on Friday, and there was positive news on both sides of the border. Canadian Employment Change sparkled with a gain of 53.7 thousand, crushing the forecast of -5.1 thousand. In the US, wages rebounded in December, as Average Hourly Earnings climbed 0.4%, edging above the estimate of 0.3%. This marked a strong turnaround after the November reading of -0.1%. The news was not as bright from Nonfarm Payrolls, which dropped to 156 thousand, well off the estimate of 175 thousand. This was the key indicator’s weakest showing in 3 months.

Last week’s Federal Reserve minutes were cautious in tone. The ensuing thumb-downs from the market sent the US dollar broadly lower as USD/CAD dropped to 3-week lows. In the minutes, Fed policymakers essentially said that monetary policy in the coming months will be dictated in large part by the economic platform of the incoming Trump administration, a platform which remains unclear. FOMC members expressed concern about higher inflation levels, given the “prospects for more expansionary fiscal policies in the coming years”. This is a clear reference to president-elect Trump’s plans to increase fiscal spending and cut taxes, which would likely result in higher inflation, something the US hasn’t had to deal with in years. Still, policymakers haven’t changed their view that gradual rate hikes remains an appropriate monetary policy. Many analysts are predicting another rate hike in June, but this forecast could easily change, depending on the performance of the US economy in the first half of 2017.

Canada Adds 54,000 jobs; Unemployment hits 6.9%

USD/CAD Fundamentals

Tuesday (January 10)

• 6:00 US NFIB Small Business Index. Estimate 99.6. Actual 105.8
• 8:15 Canadian Housing Starts. Estimate 187K. Actual 207K
• 8:30 Canadian Building Permits. Estimate 2.4%. Actual -0.1%
• 10:00 US JOLTS Job Openings. Estimate 5.59M
• 10:00 US Final Wholesale Inventories. Estimate 0.9%

Wednesday (January 11)

• 10:30 US Crude Oil Inventories. Estimate 0.9M

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, January 10, 2017

USD/CAD January 10 at 8:40 EST

Open: 1.3215 High: 1.3257 Low: 1.3195 Close: 1.3244

USD/CAD Technical

• USD/CAD showed limited movement in the Asian session. The pair posted small gains in European trade but has retracted early in the North American session
• 1.3120 is providing support
• 1.3253 is a weak resistance line

Further levels in both directions:

• Below: 1.3120, 1.3003 and 1.2922
• Above: 1.3253, 1.3371, 1.3457 and 1.3589
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

In the Tuesday session, USD/CAD ratio is showing slight gains in long positions. Currently, long positions have a majority (61%), indicative of trader bias towards USD/CAD continuing to move higher.

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