USD/CAD – Canadian dollar breaks below 1.32 as greenback under pressure

The Canadian dollar continues to improve this week. Currently, the pair is trading at 1.3193, down 0.14% on the day. There are no data releases out of the U.S., but investors will be keeping a close eye on the Federal Reserve minutes from the January meeting. There are no Canadian indicators on the schedule. Thursday will be much busier. In the U.S., key events include durable goods and unemployment claims, and Canada will release ADP nonfarm payrolls.

If recent comments out of the Fed are any indication, the minutes from the January policy meeting are likely to be dovish. The Fed has sent signals that it will ease up on rate policy this year, after aggressively raising rates four times in 2018. The January rate statement had a decidedly dovish tone, as policymakers discarded previous pledges of “further gradual increases” in interest rates, and said it would be “patient” before any further hikes. The current Fed projection calls for two rate hikes this year, but that is subject to change, based on the strength of the U.S. economy. The markets have priced in a hold on rates for the near-term, with little expectation of a rate hike in the first half of the year.

The markets remain optimistic over the U.S-China trade spat, and stronger risk appetite is bullish for the Canadian dollar, a minor currency. Chinese and U.S. officials are now conducting a fourth round of talks, as the sides look to ease trade tensions after months of tit-for tat tariffs which have hurt global growth and rocked the stock markets. Treasury Secretary Steven Mnuchin joined the talks last week and called the negotiations “productive”. The U.S. has threatened to impose stiff new tariffs on March 1, but on Tuesday, President Trump said that the talks were going well and that March 1 was not a “magical day”. If the March 1 deadline is removed, traders can expect the Canadian dollar to respond with strong gains.

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USD/CAD Fundamentals

Wednesday (February 20)

• 14:00 US FOMC Meeting Minutes

Thursday (February 21)

• 8:30 Canadian ADP Nonfarm Employment Change
• 8:30 Canadian Wholesale Sales
• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Durable Goods Orders. Estimate 0.8%
• 8:30 US Philly Fed Manufacturing Index. Estimate 15.6
• 8:30 US Unemployment Claims. Estimate 220K

*All release times are EST

*Key events are in bold

USD/CAD for Wednesday, February 20, 2019

USD/CAD, February 20 at 8:50 EST

Open: 1.3212 High: 1.3217 Low: 1.3177 Close: 1.3193

USD/CAD Technical

USD/CAD ticked lower in the Asian session and is showing limited movement in European trade

• 1.3125 is providing support
• 1.3200 has switched to a resistance role after losses by USD/CAD on Wednesday
• Current range: 1.3125 to 1.3200

Further levels in both directions:

• Below: 1.3125, 1.3049 and 1.2969
• Above: 1.3200, 1.3290, 1.3383 and 1.3445

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