USD/CAD – Canadian Dollar in Holding Pattern Ahead of GDP

USD/CAD is trading quietly on Tuesday, as the pair trades at 1.3515 in the European session. On the release front, Canada will release GDP, while the key event out of the US is ISM Manufacturing PMI. On Wednesday, the US releases the ADP Nonfarm Payrolls, with the official Nonfarm Payrolls report to follow on Friday.

Canadian releases started off the week on a positive note. The current account deficit narrowed to C$15.4 billion, better than the forecast of C$16.8 billion. This marked a 4-month low for this indicator. The Raw Materials Price Index, which measures inflation in the manufacturing sector, came in at -0.4%, compared to the estimate of -3.2%. Although it marked a third straight decline, it may signal some improvement in inflation, which has been persistently weak. All eyes are on Canadian GDP, which is released monthly, unlike the US and other countries, which publish GDP reports on a quarterly basis. The markets are braced for a small gain of 0.1%. A soft reading could reverse the recent gains of the Canadian dollar and send the currency southwards.

The Canadian dollar surged last week, posting gains of close to 300 points against its US counterpart and improving to it highest level since early December. Oil prices have recovered somewhat, which has been good news for Canada, the world’s fifth largest oil producer. This has helped prop up the Canadian dollar, which has been hit hard by the collapse in oil prices which started in September 2015. The US posted strong durable goods data last week, and the Canadian dollar rose sharply, as stronger manufacturing activity in the US will likely translate into greater demand for Canadian raw materials.

The US economy has shown signs of softness in early 2016, and January reports from the housing sector are raising concerns. Housing Starts and Building Applications fell in January, and New Home Sales and Pending Sales followed suit, missing expectations. Activity in the housing sector is closely monitored by analysts, as a decrease in home building can affect other sectors of the economy. The US manufacturing sector has also struggled, although recent durable goods order were much stronger than expected. The markets will next shift focus to the employment front, starting with the ADP Nonfarm Payrolls. The estimate stands at 185 thousand, much lower than the previous release of 205 thousand.

USD/CAD for Tuesday, March 1, 2016

USD/CAD March 1 at 6:10 EST

Open: 1.3535 Low: 1.3480 High: 1.3551 Close: 1.3515

USD/CAD Technical

• USD/CAD has been flat in the Asian and European sessions
• 1.3457 is providing support
• There is resistance at 1.3587
• Current range: 1.3457 to 1.3587

Further levels in both directions:

• Below: 1.3457, 1.3318 and 1.3223
• Above: 1.3587, 1.3757 and 1.39

USD/CAD Fundamentals

Tuesday (March 1)

• 8:30 Canadian GDP. Estimate 0.1%
• 9:30 Canadian RBC Manufacturing PMI
• 9:45 US Final Manufacturing PMI. Estimate 51.0 points
• 10:00 US ISM Manufacturing PMI. Estimate 48.5 points
• 10:00 US Construction Spending. Estimate 0.5%
• 10:00 US ISM Manufacturing Prices. Estimate 35.5 points
• All Day – US Total Vehicles. Estimate 17.6M

Upcoming Key Events

Wednesday (March 2)

• 8:15 US ADP Non-Farm Employment Change. Estimate 185K

*Key events are in bold

*All release times are EST

For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

OANDA’s Open Positions Ratio

In the USD/CAD ratio, long positions retain a slight majority of positions (55%). This points to trader bias towards the Canadian dollar resuming its upward movement.

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.