USD/CAD – Canadian Dollar Dips, Markets Eye Powell Testimony

The Canadian dollar is down slightly in the Monday session. Currently, USD/CAD is trading at 1.2683, down 0.23% on the day. On the release front, there are no Canadian releases on the schedule. In the US, the sole indicator is New Home Sales, which is expected to slow to 627 thousand. On Tuesday, the US releases CB Consumer Confidence, with an estimate of 123.9 points. We’ll also hear from Fed Chair Designate Jerome Powell and Treasury Secretary Steven Mnuchin. Canada releases the Raw Materials Price Index, and BoC Governor holds a press conference about the Financial System Review.

Federal Reserve policymakers remain upbeat about the U.S economy, according to the minutes of the most recent policy meeting. The minutes indicated that policymakers expected the U.S economy to continue showing strong growth, and predicted that interest rates will be raised in the “near term”. The members discussed the vexing question of why inflation has been persistently low (no quick-fix solution was provided), with most agreeing that a tight labor market should lead to higher inflation levels. Although policymakers did not provide further hints about the timetable of a rate hike, the markets remain convinced that additional rates are imminent. The odds of a rate hike in December are 93%, and the odds of a January raise are at 91%.

The markets will be keeping a close eye on Jerome Powell, who testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Will Powell be a clone of outgoing chair Janet Yellen? Powell inherits an economy that is in fine shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

USD/CAD Fundamentals 

Monday (November 27)

• 10:00 US New Home Sales. Estimate 627K
• 17:30 US FOMC Member Neel Kashkari Speaks
• 19:00 US FOMC Member William Dudley Speaks

Tuesday (November 28)

• 8:30 Canadian RMPI
• 10:00 US CB Consumer Confidence. Estimate 123.9
• 10:00 Fed Chair Designate Jerome Powell Speaks
• 11:30 BOC Governor Stephen Poloz Speaks
• 15:45 US Treasury Secretary Steven Mnuchin Speaks

*All release times are GMT

*Key events are in bold

USD/CAD for Monday, November 27, 2017

USD/CAD, November 27 at 8:20 EDT

Open: 1.2713 High: 1.2724 Low: 1.2681 Close: 1.2686

USD/CAD Technical

USD/CAD inched higher in the Asian session and has posted slight losses in European trade

• 12630 is providing support
• 1.2757 is the next resistance line
• Current range: 1.2630 to 1.2757

Further levels in both directions:

• Below: 1.2630, 1.2532 and 1.2432
• Above: 1.2757, 1.2860, 1.3015 and 1.3165

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little change in the Monday session. Currently, long positions have a majority (54%), indicative of trader bias towards USD/CAD reversing directions and moving higher.

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