USD/CAD – Canadian Dollar Quiet Ahead of Fed Rate Announcement

The Canadian dollar is almost unchanged in the Wednesday session. Currently, USD/CAD is trading at 1.2864, down 0.02% on the day. On the release front, there are no Canadian releases on the schedule. In the US, CPI is forecast to improve to 0.4%. The Federal Reserve meets for its monthly policy meeting, and is widely expected to raise rates to a range between 1.25% to 1.50%. On Thursday, Canada releases NHPI and Bank of Canada Stephen Poloz speaks at an event in Toronto. The US will release retail sales reports as well as unemployment claims.

Will the Federal Reserve press the rate trigger on Wednesday? The CME Group has priced in a quarter-point rate hike at 87%, so it would be a huge surprise if the Fed doesn’t raise the benchmark rate. Even though this move has been priced in, rate hikes tend to trigger a surge of confidence among investors, and a rate hike could boost global stock markets. Today’s move could be the start of a series of incremental hikes, as the odds of a January increase stand at 86%. The Fed has hinted that it could raise rates up to three times in 2018, but the pace of increases will depend to a great extent on the strength of the economy and inflation levels. The US labor market remains at full capacity and various sectors in the economy are reporting a lack of workers. Still, this has not translated into stronger wage growth, despite predictions from Janet Yellen and other Fed policymakers that a lack of workers is bound to push up wages.

It has been slim pickings for investors looking at Canadian fundamentals, as there are only two indicators this week. On Thursday, Canada releases a housing report, followed by Manufacturing Sales on Friday. The markets are expecting that the manufacturing indicator will jump to 0.9%, which could give a boost to the struggling Canadian dollar. The indicator has posted two straight gains, easily beating the estimate on both occasions. Investors will be keeping a close eye on the Fed, and the expected rate hike on Wednesday could push the Canadian dollar lower.

USD/CAD Fundamentals 

Wednesday (December 13)

• 8:30 US CPI. Estimate 0.4%
• 8:30 US Core CPI. Estimate 0.2%
• 10:30 US Crude Oil Inventories. Estimate -3.6M
• Tentative – President Trump Speaks
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.50%
• 14:00 US FOMC Press Conference

Thursday (December 14)

• 8:30 Canadian NHPI. Estimate 0.2%
• 8:30 US Core Retail  Sales. Estimate 0.6%
• 8:30 US Retail  Sales. Estimate 0.3%
• 8:30 US Unemployment Claims. Estimate 237K

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, December 13, 2017

USD/CAD, December 13 at 8:00 EDT

Open: 1.2867 High: 1.2881 Low: 1.2849 Close: 1.2864

USD/CAD Technical

USD/CAD has ticked lower in the Asian session. In European trade, the pair edged higher but has retracted

• 1.2757 is providing support
• 1.2860 is under pressure in resistance
• Current range: 1.2757 to 1.2860

Further levels in both directions:

• Below: 1.2757, 1.2630, 1,2494, and 1.2368
• Above: 1.2860, 1.3015 and 1.3161

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged this week. Currently, long positions have a majority (52%), indicative of slight trader bias towards USD/CAD breaking out and moving 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.