USD/CAD – Canadian dollar edges lower ahead, building permits misses forecast

The Canadian dollar has edged lower in the Wednesday session. Currently, USD/CAD is trading at 1.2973, up 0.19% on the day. On the release front, Canadian Building Permits gained 0.4%, shy of the estimate of 0.5%. In the U.S, PPI and Core PPI both gained 0.2%, matching the estimate. These inflation readings were the strongest gains since June. Later in the day, the U.S releases. On Thursday, the U.S will release CPI, unemployment claims and  the Treasury currency report, a semi-annual publication.

Will there be any surprises in the U.S Treasury currency report? The report provides details of global exchange rate policies, as well as a list of countries which are deemed currency manipulators. In the April report, the U.S did not name any of its major partners as currency manipulators. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. Traders should treat the report as a market-mover.

With the U.S economy continuing to post strong numbers, the Federal Reserve is on track to raise rates in December. This would be the fourth rate hike in 2018, and the markets are expecting three more hikes in 2019. Not surprisingly, this has put pressure on the Bank of Canada to raise rates as well. The Canadian economy is in good shape, but not nearly as strong as its southern neighbor. The Bank of Canada holds its next policy meeting on October 24, and the strength of key Canadian releases will be a major factor as to whether policymakers raise rates.

European open – Brexit reports provide early lift

Dollar gains pause, but probably not for long

Pound extends gains on Brexit noise

USD/CAD Fundamentals

Wednesday (October 10)

• 8:30 Canadian Building Permits. Estimate 0.5%. Actual 0.4%
• 8:30 US PPI. Estimate 0.2%. Actual 0.2%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.2%
• 10:00 US Final Wholesale Inventories. Estimate 0.8%
• 13:01 US 10-year Bond Auction
• Tentative – US Treasury Currency Report
• 18:00 US FOMC Raphael Bostic Speaks

Thursday (October 11)

• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 207K

*All release times are DST

*Key events are in bold

USD/CAD for Wednesday, October 10, 2018

USD/CAD, October 10 at 8:10 DST

Open: 1.2949 High: 1.2969 Low: 1.2927 Close: 1.2964

USD/CAD Technical

USD/CAD was mostly flat in the Asian session. In European trade, the pair ticked lower but has recovered these losses and moved higher

• 1.2831 is providing support
• 1.2970 is a weak resistance line
• Current range: 1.2831 to 1.2970

Further levels in both directions:

• Below: 1.2831, 1.2733 and 1.2649
• Above: 1.2970, 1.3067, 1.3198 and 1.3292

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