USD/CAD – Canadian Dollar in Holding Pattern Ahead of Fed Minutes

USD/CAD is steady on Thursday, as the pair trades at 1.3050 early in the North American session. Taking a look at economic releases, Canada posted good housing numbers. Housing Starts easily beat the forecast, posting a reading of 231 thousand. Also, the Canadian New Housing Price Index was within expectations, with a gain of 0.3%. In the US, unemployment claims were lower than expected, with a reading of 263 thousand. Traders should keep a close eye on Thursday’s key event – the Federal Reserve Policy Meeting Minutes. 

A strong case can be made that the value of the Canadian dollar is strongly linked to oil prices, as oil is one of Canada’s major exports. USD/CAD was as low as 1.22 in June, prior to the crash of oil on global markets. It’s been a rocky ride for the loonie since then, as oil has dropped to multi-year lows. In late September, the struggling Canadian dollar was close to the 1.35 level, but the currency is seeing some relief. This is in large part due to rising oil prices, which have reached their highest levels since mid-August. A report this week from the US Energy Information Agency said that the global surplus of crude is expected to ease, which should help stabilize oil prices.

Anticipation is high as the Federal Reserve is set to release the minutes of its most recent policy meeting later on Thursday. For months, expectations had been running high that the Federal Reserve might press the rate trigger and bump up rates at the September meeting. However, the Fed stayed on the sidelines and maintained rates, and the US dollar faced broad pressure from its rivals as a result. At the same time, the policy statement had a hawkish tone, giving the markets hope that the Fed could still make a move prior to the end of the year. A dismal US Nonfarm Payrolls report late last week poured cold water on these hopes, but market sentiment can change fairly quickly, and if the US rebounds with some strong data, we could see more optimism about a rate hike. If the Fed minutes give a vote of confidence to the US economy or provide any clues about a rate hike, the dollar could respond with gains.

USD/CAD Fundamentals

Thursday (Oct. 8)

• 12:15 Canadian Housing Starts. Estimate 202 thousand. Actual 231 thousand.
• 12:30 Canadian New Housing Price Index. Estimate 0.2%. Actual 0.3%.
• 12:30 US Unemployment Claims. Estimate 274 thousand. Actual 263 thousand. 

The unemployment claims reading was much stronger than expected, and could revive speculation about a rate hike from the Fed before year’s end. The markets will be encouraged by the fact that this is the lowest claims reading since mid-July.

Upcoming Events

Thursday (Oct. 8)

• 18:00  Federal Reserve FOMC Meeting Minutes

The markets will be watching this event closely, given the continuing speculation about a rate hike by the Federal Reserve. Any hints about a rate hike could boost the US dollar against the Canadian currency.

Friday (Oct. 9)

• 12:30 Canadian Employment Change

This is one of the most important economic indicators, and an unexpected reading could have a sharp impact on USD/CAD. The indicator posted an excellent gain of 12.0 thousand in August, crushing the estimate of -4.8 thousand. The markets are expecting another strong gain in September, with the estimate standing at 10.5 thousand. If the indicator matches or beats the estimate, we could see the Canadian dollar take advantage and post gains. The unemployment rate, which currently stands at a round 7.0%, is expected to dip to 6.9% in the September report.

• 14:30 Bank of Canada Business Outlook Survey

The BOC releases this report each quarter. It is based on a survey of about 100 businesses, which are asked about their hiring, spending and investment plans. Analysts keep close tabs on this report, as the business sector is one of the key drivers of the Canadian economy. A report which points to optimism on the part of Canadian businesses could give a boost to the Canadian dollar.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Thursday, October 8, 2015

USD/CAD October 8 at 13:35 GMT

USD/CAD 1.3054 H: 1.3074 L: 1.3021

USD/CAD Technical

• USD/CAD is showing little movement, but has tested resistance at 1.3063.
• 1.2930 is a strong support level.
• Current range: 1.2930 to 1.3063

Further levels in both directions:

• Below: 1.2930, 1.2798, 1.2646 and 1.2552
• Above: 1.3063, 1.3165, 1.3213 and 1.3310

OANDA’s Open Positions Ratio

USD/CAD ratio is showing no movement on Thursday, consistent with the lack of activity from the USD/CAD. The ratio has a majority of long positions (55:45), indicative of trader bias towards the Canadian dollar moving higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.