USD/CAD – Canadian dollar trading sideways, wholesale sales fall

The Canadian dollar has edged higher at the start of the week. In the Monday session, USD/CAD is trading at 1.3097, down 0.04% on the day. On the release front, it’s a quiet start to the week. Canadian Wholesale Sales declined by 0.1%, after a strong gain of 1.5% in the previous release.

It was a disappointing end to the week for Canadian numbers, as consumer spending and inflation data dropped into negative territory. Core CPI dropped by 0.4%, weaker than the estimate of -0.1%. Core Retail Sales declined by 0.4%, missing the estimate of 0.1%. Retail sales missed the forecast of 0.1%, with a reading of -0.4%. Will Friday’s dismal consumer numbers affect the Bank of Canada’s plan to raise rates on Wednesday? The markets are still expecting the BoC to raise rates by a quarter-point, which would mark the third rate increase in 2018. With Canada, the U.S and Mexico about to enter the USMCA, which replaces the NAFTA pact, the last obstacle for the BoC on the path to normalization has been removed and analysts are now expecting three rate hikes in 2019, up from a forecast of two hikes just a few months ago.

The U.S dollar was broadly higher on Thursday, after a hawkish tone from the Federal Reserve minutes. The minutes indicated that a majority of members want to continue raising interest rates until the U.S economy shows signs of slowing down. However, the duration of a tighter policy remains unclear, as the minutes noted that “there is considerable uncertainty surrounding all estimates of the neutral federal funds rate.” This would likely be around the 3 percent level, which will not be reached until the second half of 2019, as the Fed has indicated it will raise rates three times next year. At the September meeting, the Fed removed the phrase “the stance of monetary policy remains accommodative”, which was considered outdated, given the policy of steady rate hikes. As rates approach the “neutral rate”, we could see further changes in language at upcoming policy meetings.

Desperately seeking stability

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USD/CAD Fundamentals

Monday (October 22)

• 8:30 Canadian Wholesale Sales. Estimate 0.1%

Tuesday (October 23)

• 10:00 US Richmond Manufacturing Index. Estimate 25
• 13:30 US FOMC Member Bostic Speaks

*All release times are DST

*Key events are in bold

USD/CAD for Monday, October 22, 2018

USD/CAD, October 22 at 8:15 DST

Open: 1.3102 High: 1.3118 Low: 13080 Close: 1.3097

USD/CAD Technical

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

• 1.3067 is providing support
• 1.3198 is the next resistance line
• Current range: 1.3067 to 1.3198

Further levels in both directions:

• Below: 1.3067, 1.2970, 1.2831 and 1.2733
• Above: 1.3198, 1.3292 and 1.3387

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