USD/CAD – Canadian Dollar Edges Higher, Retail Sales Next

The Canadian dollar has posted slight gains in the Thursday session. Currently, the pair is trading at 1.2328, down 0.15% on the day. On the release front, it’s a busy day on both sides of the border. Canada will release retail sales reports, while the US publishes unemployment claims and New Home Sales. On Friday, Canada publishes CPI and the US releases Advance GDP and durable goods reports.

The Canadian economy has been performing fairly well, but there is a dark cloud on the horizon regarding NAFTA. The free trade agreement is critical for the Canadian economy, so threats by US President Trump to blow up the agreement are causing genuine concern for the government and the Bank of Canada. Negotiations between Canada, Mexico and the US have not yielded much progress, and a sixth round of negotiations started on Tuesday in Montreal. Trump has repeatedly said he is unhappy with the deal, and would prefer a new bilateral agreement between the US and Canada. Still, Trump is unpredictable, and there are also many US companies that benefit from the current deal and are opposed to the US pulling the plug. If NAFTA is terminated, it’s a good bet that the Canadian dollar will take a tumble.

It should be a smooth transition for the Federal Reserve, as Jerome Powell is set to replace Janet Yellen as chair of the powerful central bank. The Senate confirmed Jerome Powell as the next head of the powerful Federal Reserve on Tuesday. The vote of 84-13 was a cakewalk, reflecting strong bipartisan support for Powell. The new chair is expected to continue Yellen’s monetary stance, which was marked by small, incremental rate hikes during a period of economic expansion. The Fed has started to trim its massive balance sheet, another vote of confidence in the strength of the economy. At the same time, Fed policymakers are divided over how to approach inflation, which remains below the Fed target of 2 percent, despite a strong economy and a red-hot labor market. Another unknown is how the recent tax reform legislation will impact the US economy, and investors will be looking at the Fed as one of the sources for guidance.

Dollar Collapses After Mnuchin Weak Currency Comments

USD/CAD Fundamentals

Thursday (January 25)

• 8:30 Canadian Core Retail Sales. Estimate 0.8%
• 8:30 Canadian Retail Sales. Estimate 0.7%
• 8:30 US Unemployment Claims. Estimate 236K
• 8:30 US Goods Trade Balance. Estimate -68.6B
• 10:00 US New Home Sales. Estimate 679K
• 10:00 US CB Leading Index. Estimate 0.5%
• 10:30 US Natural Gas Storage. Estimate -270B

Friday (January 26)

• 8:30 Canadian CPI. Estimate -0.3%
• 8:30 US Advance GDP. Estimate 3.0%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Advance GDP Price Index. Estimate 2.3%
• 8:30 US Durable Goods Orders. Estimate 0.9%

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, January 25, 2018

USD/CAD, January 25 at 7:50 EDT

Open: 1.2347 High: 1.2356 Low: 1.2293 Close: 1.2328

USD/CAD Technical

USD/CAD edged lower in the Asian session and continues to lose ground in European trade

• 1.2190 is providing support
• 1.2351 has switched to a resistance role following losses by the pair
• Current range: 1.2190 to 1.2351

Further levels in both directions:

• Below: 1.2190, 1.2060 and 1.1903
• Above: 1.2351, 1.2494, 1.2630, and 1.2757

OANDA’s Open Positions Ratio

USD/CAD ratio is showing movement towards short positions. Currently, long positions have a majority (55%), indicative of trader bias towards USD/CAD reversing directions and moving to higher ground.

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.