USD/CAD Hits 9-Week Highs Despite Strong Canadian Construction Data

USD/CAD continues to strengthen in the Wednesday session. Early in North American trade, the pair is trading at 1.3440. On the release front, it’s a busy day in Canada. Housing Starts improved to 210 thousand, above the estimate of 207 thousand. Building Permits posted a strong gain of 5.4%, beating the forecast of 3.1%. Finally, Labor Productivity, a quarterly release, posted a gain of 0.4% in the first quarter. This matched the forecast. In the US, ADP Nonfarm Employment Change soared to 298 thousand, well above the estimate of 184 thousand. On Thursday, the US releases unemployment claims, with the indicator expected to rise to 239 thousand.

Canada’s employment market has improved in recent months, buoyed by strong employment gains. The economy added 48.3 thousand jobs and 53.7 thousand jobs in December and January respectively. This surprised the markets, which had predicted declines for each reading. The unemployment rate has also improved, dropping to 6.8%. A strong US economy has been good news for Canada, which is heavily dependent on its southern neighbor. At the same time, speculation of an imminent rate hike by the Fed has boosted the US dollar, which has jumped 2.5% against the Canadian currency since the end of February.

Donald Trump and his new administration continues to create controversy on an almost basis, much to the consternation of the markets. Still, the dollar hasn’t skipped a beat and remains at high levels against its major rivals, including the Canadian dollar. The greenback has benefited from a strong economy and the increasing likelihood of a rate hike at the upcoming Fed policy meeting on March 15. The likelihood of a March hike has jumped to 84%, according to the CME group, compared to 33% just a week ago. We’ll get a look at US Nonfarm Payrolls on Friday, which is expected to soften to 185 thousand. If the indicator beats expectations, the greenback rally could continue and increase the odds of a March rate hike.

Are Red Flags Appearing in the USD Rally?

USD/CAD Fundamentals

Wednesday (March 8)

• 8:15 Canadian Housing Starts. Estimate 205K. Actual 210K
• 8:15 US ADP Nonfarm Employment Change. Estimate 184K. Actual 298K
• 8:30 Canadian Building Permits. 3.1%. Actual 5.4%
• 8:30 Canadian Labor Productivity. Estimate 0.4%. Actual 0.4%
• 8:30 US Revised Nonfarm Productivity. Estimate 1.5%. Actual 1.3%
• 8:30 US Revised Unit Labor Costs. Estimate 1.6%. Actual 1.7%
• 10:00 US Final Wholesale Inventories. Estimate -0.1%
• 10:30 US Crude Oil Inventories. Estimate 1.1M
• 13:01 US 10-y Bond Auction

Thursday (March 9)

• 8:30 US Unemployment Claims. Estimate 239K

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, March 8, 2017

USD/CAD March 8 at 8:45 EST

Open: 1.3412 High: 1.3464 Low: 1.3397 Close: 1.3452

USD/CAD Technical

• USD/CAD was flat in the Asian session and posted gains in European trade. The pair is steady early in North American session.
• 1.3371 has some breathing room in support following gains by USD/CAD in the Wednesday session
• 1.3461 is a weak resistance line

Further levels in both directions:

• Below: 1.3371, 1.3253, 1.3120 and 1.3003
• Above: 1.3461, 1.3551 and 1.3672
• Current range: 1.3371 to 1.3551

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little change in the Wednesday session. Currently, long positions have a strong majority (68%), indicative of trader bias towards USD/CAD continuing to move higher.

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