USD/CAD – Canadian dollar steady as BoC expected to stand pat

The Canadian dollar has ticked higher in the Wednesday session, after considerable gains on Tuesday. Currently, USD/CAD is trading at 1.3278, up 0.10% on the day. On the release front, the Bank of Canada will set the benchmark rate at its policy meeting. There are no major events in the United States. On Thursday, it’s a busy day on both sides of the border. Canada releases trade balance and Ivey PMI. In the U.S., employment data will be in focus, with the release of ADP nonfarm payrolls and unemployment claims. We’ll also get a look at ISM Non-Manufacturing PMI.

The Bank of Canada has been busy in 2018, raising interest rates three times. Just a few months ago, there was a strong likelihood that the BoC would end the year with a final rate hike, but economic conditions have changed dramatically and there are a number of factors in favor of the bank staying on the sidelines. The escalating trade war between the U.S. and China has hurt the Canadian export sector, and oil prices have fallen. Domestically, GDP declined 0.2% in September, the first drop since January. As well, the Federal Reserve has hinted that it will reduce the number of rate hikes in 2019, which has eased pressure on the BoC to raise rates.

It’s been a volatile week for the Canadian dollar, which has mirrored movement in the global stock markets. Equities started the week with gains, but this proved to be short-lived, as investor optimism following the Trump-Xi meeting quickly dissipated. At the start of the week, the Canadian dollar jumped after President Trump and Chinese President Xi reached an agreement, whereby the U.S. agreed to suspend further tariffs until March 1. However, investors have sobered since, wondering if the 90-day truce is simply a pause in the trade war between the world’s two largest economies. This has lowered risk appetite, and the Canadian dollar has now given up most of the Monday gains. The U.S. and China remain far apart on a number of issues, including repeated charges by the U.S. that China is engaged in theft of U.S. intellectual property. The markets have been very sensitive to the trade dispute, and the upcoming negotiations between the U.S. and China, with the likely ups-and-downs, promise to have a significant effect on market movement.

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USD/CAD Fundamentals

Wednesday (December 5)

• All Day – OPEC-JMMC Meetings
• 10:00 BoC Rate Statement
• 10:00 BoC Overnight Rate. Estimate 1.75%
• 14:00 US Beige Book
• 20:15 US FOMC Member Quarles Speaks

Thursday (December 6)

• All Day – OPEC Meetings
• 8:15 US ADP Nonfarm Employment Change. Estimate 196K
• 8:30 Canadian Trade Balance
• 8:30 US Unemployment Claims. Estimate 226K
• 8:35 BoC Governor Poloz Speaks
• 10:00 Canadian Ivey PMI. Estimate 60.3
• 10:00 US ISM Non-Manufacturing PMI. Estimate 59.2
• 18:45 US Federal Reserve Chair Powell Speaks

*All release times are DST

*Key events are in bold

USD/CAD for Wednesday, December 5, 2018

USD/CAD, December 5 at 8:30 EST

Open: 1.3265 High: 1.3296 Low: 1.3253 Close: 1.3277

USD/CAD Technical

USD/CAD has edged higher in the Asian session and has been mostly flat in European trade

• 1.3198 is providing support
• 1.3292 has switched to a resistance role. It is a weak line
• Current range: 1.3198 to 1.3292

Further levels in both directions:

• Below: 1.3198, 1.3099, 1.2970 and 1.2888
• Above: 1.3292, 1.3383 and 1.3461

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