USD/CAD – Canadian Dollar Improves, GDP Next

The Canadian dollar has posted slight losses in the Wednesday session. Currently, the pair is trading at 1.2281, down 0.45% on the day. On the release front, Canada releases GDP for December, which is expected to climb to 0.4%. Canada will also release an important inflation indicator, the Raw Materials Price Index. The markets are braced for a sharp drop of 2.2%. In the US, the markets will get a good look at employment numbers, starting with ADP Nonfarm Employment Change. The indicator is expected to slow to 186 thousand. The Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%. On Thursday, the US publishes unemployment claims and the ISM Manufacturing PMI.

The latest round of negotiations over NAFTA ended in Montreal last week, and there were no breakthroughs. Still, the sides continue to talk, and a Merrill Lynch has lowered the odds of the US leaving the pact to 25 percent. The US has demanded far-reaching concessions from Canada and Mexico, such as shifting more auto production to the US. Canada and Mexico are strongly opposed to the US demands, but both economies would take a sharp hit if NAFTA is terminated. At the same time, many US businesses don’t want to blow up NAFTA and are pressuring President Trump to remain in the trade pact. The next round of negotiations is scheduled for late February in Mexico.

All eyes are on the Federal Reserve, which will make a rate announcement on Wednesday, the final one under Janet Yellen’s watch. The tone of the rate statement could affect investor sentiment and have an impact on the currency markets. It’s a virtual certainty that the Fed will leaves rates unchanged this time around, although it’s likely that the Fed will raise rates by a quarter-point at the March meeting. Yellen will make way for Jerome Powell, who takes over as chair in early February. Powell is expected to hold the course on monetary policy, which was marked by small, incremental interest rates in order to keep the robust US economy from overheating.

USD/CAD Fundamentals

Wednesday (January 31)

• 8:15 US ADP Nonfarm Employment Change. Estimate 191K
• 8:30 Canadian GDP. Estimate 0.4%
• 8:30 Canadian RMPI. Estimate -2.2%
• 8:30 Canadian IPPI. Estimate -0.2%
• 8:30 US Employment Cost Index. Estimate 0.6%
• 9:45 US Chicago PMI. Estimate 64.2
• 10:00 US Pending Home Sales. Estimate 0.5%
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.50%

Thursday (February 1)

• 8:30 US Unemployment Claims. Estimate 237K
• 10:00 ISM Manufacturing PMI. Estimate 58.7

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, January 31, 2018

USD/CAD, January 31 at 8:00 EDT

Open: 1.2337 High: 1.2348 Low: 1.2272 Close: 1.2281

USD/CAD Technical

USD/CAD has posted slight losses in the Asian and European sessions

• 1.2190 is providing support
• 1.2351 is the next resistance line
• 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 almost unchanged this week. Currently, long positions have a majority (59%), indicative of trader bias towards USD/CAD reversing directions and moving to higher ground.

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