USD/CAD – Canadian Dollar In Holding Pattern Ahead of US GDP Report

USD/CAD has edged higher in the Friday session, as the pair slightly above the 1.31 line. On the release front, there are no Canadian releases for the remainder of the week. In the US, it’s a busy day, with the release of durable goods orders, UoM Consumer Sentiment and Advance GDP. The markets are expecting the GDP report, the first for the fourth quarter, to post a gain of 2.1 percent. If the reading misses expectations, we could see some  volatility from USD/CAD.

The Canadian dollar is sensitive to oil prices, and has gained 2.3 percent in January as crude prices have moved higher. As we begin 2017, there are two interesting developments which will likely affect the price of oil in the coming weeks and months. The first is the landmark deal hammered out between OPEC and other major producers to cut oil production in an attempt to raise prices. The agreement took effect on January 1, and oil producers expect the deal to remove 2 percent of global supply from the markets. However, as oil prices have moved above the $50 level, US shale producers have stepped in and raised US crude production. Crude stockpiles rose in the US for a third consecutive week, as the surplus of 2.8 million barrels easily beat the forecast of 1.5 million. OPEC is confident that the agreement will be honored and production levels will fall. Still, if US production continues to rise and offsets the cutbacks announced by OPEC, oil prices could head lower. We’ll have to wait for January production reports in the US and from OPEC to get a better idea of which way the global oil glut is headed.

Barely a week into the presidency of Donald Trump, there are already signs of the economic approach the administration appears to be taking. Trump declared in his inauguration address that he would put “America first”, and he has followed up with some protectionist measures. Trump formally withdrew the United States from the Trans-Pacific Partnership, a broad trade agreement that would have covered some 40 percent of gobal GDP. After announcing he would renegotiate the NAFTA agreement with Canada and Mexico, Trump took aim at his southern neighbor and announced that he would build a wall between the US and Mexico. Predictably, Mexico has reacted angrily to this move, and a scheduled meeting between Trump and Mexican President  Enrique Peña Nieto has been cancelled. In the latest salvo in the growing crisis, the White House White House suggested imposing a 20 percent tax on Mexican imports to pay for construction of the wall. Trump’s unconventional and disjointed approach to international trade could have major ramifications on global trade and could lead to financial instability in global markets.

Mexico Far Reaching Implications in APAC

USD/CAD Fundamentals

Friday (January 27)

• 8:30 US Advance GDP. Estimate 2.1%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Advance GDP Price Index. Estimate 2.1%
• 8:30 US Durable Goods Orders. Estimate 2.7%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 98.2
• 10:00 US Revised UoM Consumer Inflation Expectations. Estimate 98.2

*All release times are GMT

*Key events are in bold

USD/CAD for Friday, January 27, 2017

USD/CAD January 27 at 8:05 EST

Open: 1.3090 High: 1.3130 Low: 1.3086 Close: 1.3114

USD/CAD Technical

• USD/CAD has shown limited movement in the Asian and European trade
• 1.3003 is providing support
• 1.3120 remains a weak resistance line. It could break in the Friday session

Further levels in both directions:

• Below: 1.3003, 1.2922 and 1.2815
• Above: 1.3120, 1.3253, 1.3371 and 1.3457
• Current range: 1.3003 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in Friday. Currently, long positions have a strong majority (63%), indicative of trader bias towards USD/CAD continuing to move upwards.

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