USD/CAD – Canadian dollar at 1-week high on NAFTA hopes

The Canadian dollar is trading sideways in the Wednesday session. Currently, USD/CAD is trading at 1.3075, up 0.07% on the day. On the release front, Canada releases Capacity Utilization Rate. In the U.S, PPI and Core PPI are both expected to rise to 0.2%. On Thursday, Canada releases a housing inflation report and the U.S publishes CPI as well as unemployment claims.

Trade talks between the U.S and Canada are continuing, with the parties hoping to wrap up an agreement shortly. The Bank of Canada is also keeping a close eye on the NAFTA negotiations Last week’s rate announcement that policymakers would be “monitoring closely the course of the NAFTA negotiations and other trade policy developments, and their impact on the inflation outlook”. With the Canadian economy performing well and the Fed likely raising rates later this month, there is pressure on the BoC to again raise rates in 2018. However, concerns over NAFTA and global trade tensions have won the day for now, as the BoC took a pass on a rate hike.

The U.S-China trade spat has been in the headlines for months, with the U.S slapping tariffs on China and the latter responding in kind. Will President Trump ratchet up the trade war between the world’s two largest economies? Trump has threatened to impose tariffs on $200 billion worth of Chinese tariffs, and the time period for public consultations ended last week, which means that Trump is free to announce another round of tariffs at any time. Despite fears that the trade war could trigger a global recession, trade between the U.S and China actually increased in August. The dollar has benefited from the global trade war, and further tariffs against China could unnerve investors and hurt minor currencies such as the Canadian dollar.

CAD rallies on Nafta optimism

Channel one’s confidence

USD/CAD Fundamentals

Wednesday (September 12)

• 8:30 Canadian Capacity Utilization Rate. Estimate 86.9%
• 8:30 US PPI. Estimate 0.3%
• 8:30 US Core PPI. Estimate 0.2%
• 10:30 US Crude Oil Inventories. Estimate -1.3M
• 12:45 US FOMC Member Lael Brainard
• 13:01 US 10-year Bond Auction
• 14:00 US Beige Book

Thursday (September 13)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 210K
• 10:00 US FOMC Member Randal Quarles Speaks
• 10:30 US Natural Gas Storage. Estimate 65B
• 13:01 30-year Bond Auction
• 13:15 US FOMC Member Raphael Bostic Speaks
• 14:00 US Federal Budget Balance. Estimate -169.8B

*All release times are DST

*Key events are in bold

USD/CAD for Wednesday, September 12, 2018

USD/CAD, September 12 at 8:15 DST

Open: 1.3067 High: 1.3079 Low: 1.3041 Close: 1.3075

USD/CAD Technical

USD/CAD was flat for most of the Asian session and has ticked upwards in European trade

• 1.3067 was tested earlier in support. It is a weak line
• 1.3160 was tested earlier in resistance
• Current range: 1.3160 to 1.3292

Further levels in both directions:

• Below: 1.3067, 1.2970 and 1.2831
• Above: 1.3160, 1.3292, 1.3386, and 1.3547

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