USD/CAD – Canadian Dollar Dips Ahead of US Jobless Claims

USD/CAD has posted slight gains in the Thursday session, as the pair trades at the 1.31 line. On the release front, there are two key events in the US – Unemployment Claims and New Home Sales. Both indicators are expected to soften compared to their previous readings. Friday promises to be be busy, as the US releases GDP, durable goods orders and consumer confidence reports. There are no Canadian releases for the remainder of the week.

Less than a week on the job, Donald Trump has already taken protectionist measures, signaling a major change in US economic policy. On Monday, Trump signed an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement which the US had signed but not ratified. Trump had promised to leave the TPP during the election, arguing that the deal would hurt American workers. Next stop is NAFTA, which Trump has said he will renegotiate with Canada and Mexico. Understandably, Canadian officials are worried about the new US administration’s protectionist stance, and Prime Minister Justin Trudeau and his cabinet are meeting in Calgary to plan the government’s strategy in dealing with Trump. The US is Canada’s largest trade partner and protectionist moves by the US could be devastating to the Canadian economy. However, on Monday, Trump’s senior business adviser, Stephen Schwarzman, said Canada had little cause for concern. Trump’s sights may be set more on Mexico than Canada, as he has threatened to impose tariffs on companies that move production to Mexico. Still, investors will be wary about NAFTA unraveling, as the trade agreement has been part of the economic landscape for over 20 years. These concerns could prompt investors to dump their Canadian dollars and flock to the safe-haven US dollar.

The recent rise in oil prices have boosted the Canadian dollar, but the crude rally could run out of steam. OPEC and other major producers have cut oil production in an attempt to raise prices, but their efforts could be derailed as US oil production is on the increase. Crude stockpiles rose in the US for a third consecutive week, as more US shale producers have commenced operations in as oil prices remain above the $50 level. On Sunday, OPEC announced that 1.5 million barrels had been taken out of the market, out of 1.8 million agreed to under the recent production agreement between OPEC and other oil exporters. Still, if US production continues to rise and offsets the cutbacks announced by OPEC, oil prices could head lower.

Mexico Could Pull Out of NAFTA if Renegotiation Unfavorable

After U.S Exit, Asian Nations Try to Save TPP

USD/CAD Fundamentals

Thursday (January 26)

• 8:30 US Unemployment Claims. Estimate 247K
• 8:30 US Goods Trade Balance, Estimate -64.5B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.9%
• 9:45 US Flash Services PMI. Estimate 54.4
• 10:00 US New Home Sales. Estimate 585K
• 10:00 US CB Leading Index. Estimate 0.5%
• 10:30 US Natural Gas Storage. Estimate -121B

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, January 26, 2017

USD/CAD January 26 at 6:55 EST

Open: 1.3068 High: 1.3116 Low: 1.3052 Close: 1.3108

USD/CAD Technical

• USD/CAD inched higher in the Asian session and has posted more gains in European trade
• 1.3003 is providing support
• 1.3120 remains a weak resistance line. It could break during the Thursday session

Further levels in both directions:

• Below: 1.3003, 1.2922 and 1.2815
• Above: 1.3120, 1.3253, 1.3371 and 1.3457
• Current range: 1.3003 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio is showing gains in long positions. Currently, long positions have a strong majority (64%), indicative of trader bias towards USD/CAD continuing to move upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.