USD/CAD – Canadian Dollar Improves, Markets Eye Canadian Housing Report

USD/CAD has reversed directions, posting slight gains in the Wednesday session. Currently, the pair is trading at 1.3150. On the release front, Canada will release Housing Starts, which is expected to remain above the 200K level, with the estimate standing at 202 thousand. In the US, the weekly crude oil inventories report will be released. Another strong surplus is expected, with an estimate of 202 thousand. On Thursday, the US releases the weekly unemployment claims report, which is expected to rise to 249 thousand.

America First! Trump’s protectionist stance just a few weeks into his term is setting off alarm bells with close trading partners of the US, including Canada, Mexico and Japan. Trump has declared that he intends to revisit the NAFTA trade agreement, which has been an anchor of the US-Canada trade relationship for over 20 years. Trump didn’t mince words last week when describing NAFTA, saying that “NAFTA has been a catastrophe for our country. It’s been a catastrophe for our workers and our jobs and our companies.” Although Trump is unlikely to unravel the agreement and his verbal salvos may be aimed more at Mexico than Canada, uncertainty over NAFTA’s future can’t be good news for Canada. Trump’s protectionist stance has increased nervousness in the markets and could spell bad news for the Canadian currency if investors lose their appetite for risk.

President Donald Trump continues to create controversies on an almost daily basis, and his brash and undiplomatic style has not endeared him to the markets. Moreover, the lack of an economic policy from the new administration is a major source of concern and the the post-election euphoria which sent the markets higher has dissipated. The Federal Reserve, which had trumpeted that it was planning a series of hikes in 2017, was more cautious in its recent rate statement and is expected to adopt a wait-and-see attitude in the coming months. If the economy continues to grow, there is a strong likelihood of another rate hike in the first half of 2017, which is bullish for the dollar.

Trump Reiterates His Willingness to Renegotiate NAFTA

USD/CAD Fundamentals

Wednesday (February 8)

• 8:15 Canadian Housing Starts. Estimate 202K
• 10:30 US Crude Oil Inventories. Estimate 2.7M
• 13:01 US 10-y Bond Auction

Thursday (February 9)

• 8:30 US Unemployment Claims. Estimate 249K

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, February 8, 2017

USD/CAD February 8 at 9:00 EST

Open: 1.3190 High: 1.3200 Low: 1.3146 Close: 1.3149

USD/CAD Technical

• USD/CAD showed little movement in the Asian session and posted slight losses in European trade
• 1.3120 has weakened in support
• 1.3253 is the next resistance line

Further levels in both directions:

• Below: 1.3120, 1.3003, 1.2922 and 1.2815
• Above: 1.3253, 1.3371 and 1.3461
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Wednesday session. Currently, long positions have a slight majority (53%), indicative of slight trader bias towards USD/CAD reversing directions and moving higher.

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