USD/CAD – Canadian Dollar Holds Ground as Canadian Mfg. Sales Sparkles

USD/CAD has edged lower in the Thursday session. Currently, USD/CAD is trading at 1.3030. In economic news, there are no Canadian events on the schedule. In the US, it’s another busy day, with three key events on the calendar – Building Permits, Philly Fed Manufacturing Index and Unemployment Claims. The markets are expecting unemployment claims to rise to 243 thousand.

All eyes were on Federal Reserve Chair Janet Yellen earlier this week, as she made her semi-annual appearance before Congress. In her testimony, Yellen was upbeat about the US economy. She noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. Yellen’s next challenge can be considered an enviable task – when is the appropriate time to raise rates in order to cool down the economy – in June or as early as March? A rate hike appears to be just a question of time, as Yellen warned that “waiting too long to remove accommodation would be unwise”. If the US economy stays on track in 2017, analysts expect two or three small rate hikes. At the same time, the Fed needs to take into account the economic stance of the new administration, which remains unclear. President Trump has promised to outline a tax reform plan in a few weeks, but has left the Fed and the markets in the dark regarding economic policy. Unless the economy takes an unexpected turn downwards, it’s very likely that the Fed will press the rate trigger by June.

With Europe still fuming at Britain for opting to leave the European Union, Canada is poised to take advantage of the situation. Canada and the EU have been working on a free trade agreement (CETA), and the House of Commons voted on Tuesday to adopt the agreement. The legislation now moves to the Senate, which is expected to stamp its approval in March. As well, the European Parliament voted 408-254 to ratify the agreement. CETA is expected to boost Canada-EU trade by 20 percent, which translates into $12 billion for the Canadian economy. Both sides have high hopes from the agreement. Canada is looking to reduce its dependence on the United States, which is the destination of 80 percent of Canadian exports. President Trump’s protectionist stance has sent alarm bells off in Ottawa, with Trump declaring he would rip up NAFTA. Trump has since lowered the rhetoric, saying that he wants to “tweak” the agreement with Canada. Given Trump’s unpredictability, Canada will be looking to build on CETA and conclude trade agreements with other countries. For the EU, this would mark the first trade agreement with a G-7 member and comes at a time when EU-US free trade talks have been suspended.

European Parliament Approves CETA

USD/CAD Fundamentals

Thursday (February 16)

• 00:15 US FOMC William Dudley Speech
• 8:30 US Building Permits. Estimate 1.23M
• 8:30 US Philly Fed Manufacturing Index. Estimate 18.5 points
• 8:30 US Unemployment Claims. Estimate 243K
• 8:30 US Housing Starts. Estimate 1.23M
• 10:30 US Natural Gas Storage. Estimate -130B

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, February 16, 2017

USD/CAD February 16 at 8:20 EST

Open: 1.3069 High: 1.3073 Low: 1.3009 Close: 1.3028

USD/CAD Technical

• USD/CAD showed little movement in the Asian session and has posted moderate losses in European trade
• 1.3003 is providing weak support
• 1.3120 is a weak resistance line

Further levels in both directions:

• Below: 1.3003, 1.2922 and 1.2815
• Above: 1.3120, 1.3253, 1.3371 and 1.3461
• Current range: 1.3003 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Thursday session. Currently, long positions have a majority (63%), indicative of trader bias towards USD/CAD reversing directions and moving higher.

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