USD/CAD – Canadian Dollar Drifting in Holiday Trade

The Canadian dollar is steady in the Monday session. Currently, USD/CAD is trading at 1.2871, down 0.14% on the day. On the release front, Canadian banks are closed and there are no Canadian indicators. In the US, the sole event is a speech from FOMC member Raphael Bostic. On Tuesday, Canada releases Wholesales Sales and the US publishes the Richmond Manufacturing Index.

There was a dramatic development in the China-US tariff battle on Sunday, as US Treasury Secretary Steven Mnuchin said that the trade war was being ‘put on hold’. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants have traded stiff tit-for-tat tariffs in recent weeks, worth billions in trade. These moves had raised fears of a bilateral trade war between the two largest economies in the world. The respite in tariffs means that the US can sit down with the Chinese and discuss the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China.

The Canadian dollar recorded considerable losses on Friday, after a weak core retail sales in March. The indicator declined 0.2%, well off the estimate of 0.5%. Retail Sales was stronger, with a gain of 0.6%, above the estimate of 0.3%. Inflation remained steady, as CPI came in at 0.3% in April, matching the estimate. On an annualized basis, inflation was up 2.2% in April, the third straight month it exceeded the Bank of Canada inflation target of 2.0%.

Negotiations over a new NAFTA agreement have failed to reach a conclusion, and the parties haven’t even reached an ‘agreement in principle’. Although there is no official deadline to wrap up a deal, there are upcoming events which could mean that a deal won’t be made in 2018. Mexico holds general elections in June and the U.S holds congressional mid-term elections in November. Meanwhile, the Trump administration has given both Canada and Mexico another 30-day exemption on steel and aluminum tariffs, lasting until June 1. Earlier in the week, U.S Commerce Secretary Wilbur Ross said that further extensions could be granted, depending on the progress made in the NAFTA talks. Ottawa has demanded “full and permanent” exemptions from the tariffs, but may have to cough up more concessions in the NAFTA talks in order to convince Washington to exempt Canadian steel and aluminum imports from tariffs. With US Treasury Secretary Steven Mnuchin bluntly stating on Sunday that the sides remain far apart from a deal, the NAFTA talks could be in deep trouble.

  A test of the breakouts

USD/CAD Fundamentals

Monday (May 21)

• 11:30 US FOMC Member Rafael Bostic Speaks

Tuesday (May 22)

• 8:30 Canadian Wholesale Sales. Estimate 0.9%
• 10:00 US Richmond Manufacturing Index. Estimate 9

*All release times are DST

*Key events are in bold

USD/CAD for Monday, May 21, 2018

USD/CAD, May 21 at 7:05 DST

Open: 1.2889 High: 1.2891 Low: 1.2854 Close: 1.2871

USD/CAD Technical

USD/CAD has been flat in the Asian and European sessions

• 1.2850 is a weak support line
• 1.2943 is the next line of resistance
• Current range: 1.2850 to 1.2943

Further levels in both directions:

• Below: 1.2850, 1.2757, 1.2687 and 1.2527
• Above: 1.2943, 1.3015 and 1.3125

OANDA’s Open Positions Ratio

In the Monday session, USD/CAD ratio is showing short positions with a majority (56%). This is indicative of trader bias towards USD/CAD continuing to move downwards.

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.