USD/CAD – Canadian Dollar Hits 3-Week High on Strong Oil Prices

The Canadian dollar continues to improve and has posted considerable gains in the Thursday session. In the North American session, USD/CAD is trading at 1.2770, down 0.66% on the day. On the release front, the focus is on inflation indicators on both sides of the border. In Canada, the New Housing Price Index improved to 0.0%, matching the forecast. Over in the US, consumer price index indicators remained weak. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. On Friday, Canada releases Employment Change and the unemployment rate. The US will release UoM Consumer Sentiment.

Oil prices remain at their highest level in 3-1/2 years, and this has boosted the Canadian currency, which is at its highest level since late April. President Trump’s bombshell announcement that the US would withdraw from the Iran nuclear deal, as well as increasing tensions in the Middle East have raised concerns of supply disruptions. Brent crude climbed to $77.87 in Thursday’s Asian session after Israel struck dozens of military targets in Syria on Wednesday.

The currency markets have not shown much interest in President Trump’s dramatic speech on Tuesday. Trump announced that the US would withdraw from the Iran nuclear deal. Trump blasted the agreement and said that the US would impose stiff sanctions on Iran. However, Britain, France and Germany have said they plan to remain in the deal, and will be holding a high-level meeting with Iranian leaders on how the agreement can be salvaged. With the US acknowledging that the White House does not have a ‘Plan B’, it’s unclear what happens next. Meanwhile, tensions between Israel and Iran are at a fever pitch after Israel struck dozens of military targets in Syria on Tuesday.

Bank of England to deliver a ‘hawkish’ hold

USD/CAD Fundamentals

Thursday (May 10)

• 8:30 Canadian NHPI. Estimate 0.0%
• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 219K
• 10:30 US Natural Gas Storage. Estimate 81B
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate 201.2B

Friday (May 11)

• 8:30 Canadian Employment Change. Estimate 17.8K
• 8:30 Canadian Unemployment Rate. Estimate 5.8%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.4

*All release times are DST

*Key events are in bold

USD/CAD for Thursday, May 10, 2018

USD/CAD, May 10 at 8:45 DST

Open: 1.2853 High: 1.2866 Low: 1.2743 Close: 1.2770

USD/CAD Technical

USD/CAD edged lower in the Asian session and posted further losses in European trade. The pair continues to head lower early in North American trade

• 1.2757 was tested earlier in support. This line is under strong pressure and could break in the North American session
• 1.2850 is the next line of resistance
• Current range: 1.2757 to 1.2850

Further levels in both directions:

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

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Thursday session. Currently, short positions have a majority (61%), 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.