USD/CAD – Canadian Dollar Edges Higher, Canadian NFP Sparkles

The Canadian dollar has posted slight gains in the Thursday session. Currently, USD/CAD is trading at 1.2605, down 0.19% on the day. In economic news, Canadian ADP Nonfarm Employment Change posted a sharp gain of 42.8 thousand. In the US unemployment claims ticked lower to 232 thousand, close to the estimate of 230 thousand. As well, the Philly Fed Manufacturing Index improved to 23.2 thousand, easily beating the estimate of 20.8 points. On Friday, Canada releases CPI, which is forecast to drop to 0.4%.

There were no surprises from the Bank of Canada on Wednesday, as the bank maintained the benchmark rate at 1.25 percent. The BoC was in cautious mode in the rate statement, noting that growth in the first quarter was weaker than the bank had forecast, but that it expected better news in the second quarter. The bank has some egg on its face, as in January it predicted growth of 2.5% for the first quarter, but has now revised the forecast to just 1.3% growth. Speaking after the statement, BoC Governor Stephen Poloz said that “the economy is in a good place,” but added that “interest rates are very low”. This is a clear signal that the BoC plans to raise rates in the near future, and many analysts are predicting a rate hike in July. Canada’s employment picture has been a bright spot, underscored by an excellent ADP nonfarm payrolls report on Thursday. As well, inflation has moved closer to the BoC’s target of 2 percent, making a rate hike likely in the next few months.

The protectionist US administration has reopened the NAFTA agreement, threatening to walk away if its demands for major concessions in favor of the US are not met. NAFTA is a crucial component of the Canadian economy, and the loss of NAFTA would be a nightmare for Canada. As well, the Federal Reserve plans a number of rate hikes in 2018, and if the BoC does not raise rates on its end, the Canadian dollar could fall sharply against a US currency that would be more attractive to investors.

Dollar Supported by Higher Yields

USD/CAD Fundamentals

 Thursday (April 19)

• 8:00 US FOMC Member Lael Brainard Speaks
• 8:30 Canadian ADP Non-Farm Employment Change. Actual 42.8K
• 8:30 US Philly Fed Manufacturing Index. Estimate 20.8. Actual 23.2
• 8:30 US Unemployment Claims. Estimate 230K. Actual 232K
• 9:30 US FOMC Member Randal Quarles Speaks
• 10:00 US CB Leading Index. Estimate 0.3%
• 10:30 US Natural Gas Storage. Estimate -23B
• 18:45 US FOMC Member Loretta Mester Speaks

 Friday (April 20)

• 8:30 Canadian CPI. Estimate 0.4%
• 8:30 Canadian Core Retail Sales. Estimate 0.4%
• 8:30 Canadian Retail Sales. Estimate 0.4%

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, April 19, 2018

USD/CAD, April 19 at 8:40 EST

Open: 1.2602 High: 1.2612 Low: 1.2586 Close: 1.2605

USD/CAD Technical

USD/CAD inched lower in the Asian session and has edged lower in European trade

• 1.2590 is under pressure in support
• 1.2687 is the next resistance line
• Current range: 1.2590 to 1.2687

Further levels in both directions:

• Below: 1.2590, 1.2496 and 1.2397
• Above: 1.2687, 1.2757 and 1.2850

OANDA’s Open Positions Ratio

USD/CAD ratio continues to show limited movement this week. Currently, long positions have a majority (60%), indicative of USD/CAD reversing directions and heading lower.

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.