USD/CAD – All Quiet as US, Canadian Markets on Holiday

The Canadian dollar is almost unchanged on Monday, as the pair trades at 1.2950 in the North American session. Markets in both Canada and the US are closed for bank holidays, so trade in USD/CAD will be light throughout the day. On Friday, Canada posted strong employment numbers, helping the Canadian dollar post modest gains. Three Fed Reserve FOMC members speak on Monday, and the markets will be looking for some direction as to when the Fed might raise rates. As well, BOC Governor Stephen Poloz will speak at event in Washington.

Will the US Federal Reserve press the trigger and raise rates in 2015? The markets had circled September as a likely candidate for a rate hike, but the Federal Reserve remained on the sidelines yet again. The Fed released the minutes of its September policy meeting last week, and indicated that the Fed does not feel that the timing is appropriate for a rate hike, but provided few clues as to when the Fed might take action. Policymakers cited concerns that the sluggish global economy could affect the US economy. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases which match or beat expectations. FOMC member Dennis Lockhart sounded somewhat optimistic about a rate hike in October or December, but noted that the domestic economy, especially consumer indicators, would have to be strong in order for the Fed to raise rates. Lockhart and two other FOMC members will be speaking on Monday, and the markets will be paying close attention.

The Canadian dollar has shown some impressive strength lately. The currency is trading around the 1.29 line, a gain of close to 500 points since the end of September. Why the sudden surge by the loonie? A strong case can be made that the value of the Canadian dollar is closely linked to oil prices, as the commodity is one of Canada’s major exports. With oil prices dropping to multi-year lows, the resource-dependent economy has been in a recession for the first two quarters of 2015 and the Canadian dollar has taken a tumble. However, oil prices have rebounded recently and reached their highest levels since mid-August, which has given the Canadian dollar a big boost. There was more good news on Friday, as Canadian Employment Change recorded a strong gain of 12.1 thousand in August, almost identical to the July report. This beat the forecast of 10.5 thousand. However, the unemployment rate climbed to 7.1%, up from 7.0% a month earlier. Also on Friday, the BOC Business Outlook Survey indicated that businesses plan to increase their hiring, in anticipation of stronger demand due to a more competitive Canadian dollar and a strong US economy.

USD/CAD Fundamentals

Monday (Oct. 12)

• 12:10 Fed FOMC Member Denis Lockhart Speaks.
• 14:30 Fed FOMC Member Charles Evans Speaks.
• 20:30 Fed FOMC Member Lael Brainard Speaks.

The markets will be listening closely to remarks from the FOMC members, following the release of the Federal Reserve’s minutes. Any hints about a rate hike could bolster the US dollar.

• 17:20 BOC Governor Stephen Poloz Speaks.

Poloz will address a conference in Washington. With the Canadian economy limping along, analysts will be listening for clues as to further rate cuts to stimulate the economy. Any discussion about a rate cut would be bearish for the Canadian dollar.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Monday, October 12, 2015

USD/CAD October 12 at 14:10 GMT

USD/CAD 1.2934 H: 1.2935 L: 1.2901

USD/CAD Technical

• USD/CAD posted modest losses in the Asian session, but recovered in the European session.
• Support at 1.2930 was tested earlier and is under strong pressure.
• 1.3063 is a strong resistance line.
• 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 Monday, continuing the trend which marked the ratio late last week. The ratio has a majority of long positions (54:46), indicative of slight 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.