USD/CAD – Canadian Dollar Subdued Ahead of US Retail Sales

The Canadian dollar has started the week quietly. Currently, USD/CAD is trading at 1.2604, down 0.08% on the day. In economic news, the US releases key consumer sales reports. Retail Sales are expected to improve to 0.4%, after two straight declines. Core Retail Sales is forecast to remain unchanged at 0.2%. On Tuesday, the US releases Building Permits and Housing Starts.

It was a dramatic weekend, as a US-led strike destroyed several chemical installations in Syria. Predictably, Syria and Russia strongly condemned the attack, but are unlikely to retaliate despite the rhetoric. The markets had already priced in an attack, and are hopeful that Trump’s declaration of “mission accomplished” means that things will remain relatively quiet in Syria. However, further chemical attacks by the Syrian regime could trigger a response from the US and its allies, which could result in volatility in the markets, and minor currencies like the Canadian dollar would likely take a hit.

The Federal Reserve minutes from the March meeting were hawkish, in a nod to the strong US economy. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. The Fed is expected to sit maintain rates at the May policy meeting and raise rates by a quarter-point in June.

USD/CAD Fundamentals

 Monday (April 16)

• 8:30 US Core Retail Sales. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Empire State Manufacturing Index. Estimate 19.8
• 10:00 US Business Inventories. Estimate 0.6%
• 10:00 US NAHB Housing Market Index. Estimate 71
• 13:15 US FOMC Member Raphael Bostic Speaks
• 16:00 US TIC Long-Term Purchases

 Tuesday (April 17)

• 8:30 US Building Permits. 1.33M
• 8:30 US Housing Starts. Estimate 1.27M

*All release times are GMT

*Key events are in bold

USD/CAD for Monday, April 16, 2018

USD/CAD, April 16 at 8:05 EST

Open: 1.2608 High: 1.2609 Low: 1.2601 Close: 1.2604

USD/CAD Technical

USD/CAD was flat in the Asian session. The pair edged higher in European trade but has retracted

• 1.2590 is under pressure in support
• 1.2590 is the next resistance line
• Current range: 1.2590 to 1.2687

Further levels in both directions:

• Below: 1.2590, 1.2496, 1.2397 and 1.2281
• Above: 1.2687, 1.2757 and 1.2850

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Monday session. Currently, long positions have a majority (58%), indicative of USD/CAD reversing directions and moving higher.

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