USD/CAD – Canadian Dollar Dips after US Inflation Misses Estimate

The Canadian dollar has started the week with losses. In Monday’s European session, USD/CAD is trading at 1.2532, up 0.57% on the day. On the release front, there are no major events to start the week. Canada releases Foreign Securities Purchases and the US publishes the Empire State Manufacturing Index.

Although the US economy has been performing well and the labor market remains red-hot, inflation numbers remain soft. There was some disappointment in the markets as September CPI and Core CPI narrowly missed their estimates. On the release front, CPI gained 0.5%, short of the estimate of 0.6%. Core CPI posted a small gain of 0.1%, shy of the forecast of 0.2%. With inflation an important consideration in future rate decisions by the Federal Reserve, investors will be anxiously monitoring how Fed policymakers respond to September’s soft inflation numbers. Also on Friday, US retail sales data was a mix. Core Retail Sales gained 1.0%, above the estimate of 0.9%. However, retail sales were up 1.6%, short of the forecast of 1.7%.

On Monday, the Iraqi army attacked Kurdish forces clashed near the city of Kirkuk, as the Iraqi government is trying to reestablish control over the oil-rich region. The situation has escalated since the September Kurdish referendum on independence, in which voters overwhelmingly voted in favor of independence. If the Iraqi action becomes a full-blown offensive, oil prices could continue to climb, which could boost the Canadian dollar.

US President Trump’s protectionist stance could spell trouble for Canada and Mexico. Trump has declared that the NAFTA agreement has been terrible for the US and has vowed to renegotiate the pact. Canadian Prime Minister Justin Trudeau has said that he’s looking for a “win-win” scenario for all three countries, but the talks over re-negotiating NAFTA have not gone well, and Trump has previously declared that he could scrap the deal and simply enter a new trade agreement with Canada. One of the key US demands that Canada is not happy with is a “sunset clause” which would require new negotiations every five years. The lack of progress in the talks has sent the Mexican peso lower, and if the negotiations grind to a halt, the Canadian dollar could also lose ground.

USD/CAD Fundamentals

Monday (October 16)

• 8:30 Canadian Foreign Securities Purchases. Estimate 20.05B
• 8:30 US Empire State Manufacturing Index. Estimate 20.3
• 10:30 US BoC Business Outlook Survey
• Tentative – US Federal Budget Balance. Estimate -1.0B

*All release times are GMT

*Key events are in bold

USD/CAD for Monday, October 16, 2017

USD/CAD Monday, October 16 at 8:00 EDT

Open: 1.2468 High: 1.2544 Low: 1.2468 Close: 1.2533

USD/CAD Technical

USD/CAD has edged higher in the Asian and European sessions

• 1.2459 is providing support
• 1.2598 is the next resistance line
• Current range: 1.2459 to 1.2598

Further levels in both directions:

• Below: 1.2459, 1.2302 and 1.2218
• Above: 1.2598, 1.2701 and 1.2778

OANDA’s Open Positions Ratio

In the Monday session, USD/CAD ratio is showing long positions with a majority (58%). This is indicative of trader bias towards USD/CAD continuing to move to higher ground.

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.