USD/CAD – Canadian Dollar Jumps as Fed Sends Greenback Reeling

USD/CAD is steady on Thursday, after posting strong losses in the Wednesday session. In North American trade, the pair is trading at the 1.33 line. On the release front, Canadian Foreign Securities Purchases dropped sharply to C$6.20 billion, short of the forecast of C$9.45 billion. This was the smallest reading in 6 months. In the US, Building Permits fell to 1.21 million, missing the estimate of 1.26 million. The Philly Fed Manufacturing Index dropped sharply to 32.8, above the forecast of 30.2 points. On the labor front, unemployment claims ticked down to 241 thousand, beating the forecast of 245 thousand. On Friday, Canada releases Manufacturing Sales and the US will publish the UoM Consumer Sentiment report.

There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday. The hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals. The markets were hoping that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening. There was disappointment as Fed Chair Janet Yellen reiterated that further rate hikes would be done gradually, pushing the dollar on Wednesday. As well, the US dollar may have lost ground due to traders and investors acting on “buy on rumor, sell on fact”. This larges-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, as USD/CAD declined 1.1 percent in the Wednesday session.

Oil remains under strong pressure, and weak crude prices could weigh on the Canadian dollar. West Texas crude plunged 8.7 percent last week and dipped below the $47 level on Tuesday. This was in response to reports that Saudi Arabia has increased oil production above 10 million barrels a day, raising concerns about a global oil glut. Meanwhile, US Crude Oil Inventories finally reversed directions, posting a drawdown of 0.2 million barrels, compared to an estimate of 3.3 million. This decline comes after the indicator posted 11 surpluses in the past 12 weeks, reflective of increasing US shale production. The string of surpluses has dampened OPEC’s hopes of raising prices, as the cartel cut production levels at the beginning of January. Compliance with the agreement stands at an impressive 94% and OPEC had high hopes of pushing crude to $60 or more, but oil prices continue to lose ground in 2017.

USD/CAD Fundamentals

Thursday (March 16)

• 8:30 Canadian Foreign Securities Purchases. Estimate 9.45B. Actual 6.20B
• 8:30 US Building Permits. Estimate 1.26M. Actual 1.21M
• 8:30 US Philly Fed Manufacturing Index. Estimate 30.2. Actual 32.8
• 8:30 US Unemployment Claims. Estimate 245K. Actual 241K
• 8:30 US Housing Starts. Estimate 1.26M. Actual 1.29M
• 10:00 US JOLTS Openings. Estimate 5.45M
• 10:30 US Natural Gas Storage. Estimate -60B

Upcoming Key Events

Friday (March 17)

• 8:30 Canadian Manufacturing Sales
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.1

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, March 16, 2017

USD/CAD March 16 at 9:25 EST

Open: 1.3295 High: 1.3321 Low: 1.3275 Close: 1.3296

USD/CAD Technical

• USD/CAD has inched lower in the Asian and European sessions
• 1.3371 is providing support
• 1.3461 is fluid. Currently, it is a weak resistance line

Further levels in both directions:

• Below: 1.3253, 1.3120 and 1.3006
• Above: 1.3371, 1.3461, 1.3551 and 1.3672
• Current range: 1.3253 to 1.3371

OANDA’s Open Positions Ratio

USD/CAD ratio showed strong movement towards short positions after USD/ CAD posted strong losses on Wednesday. Currently, short positions have a majority (56%), indicative of trader bias towards USD/CAD continuing to move higher.

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.