USD/CAD – Canadian Dollar Slips to 14-Week Low as Greenback Flexes Muscles

The Canadian dollar continues to lose ground this week. In the Friday session, USD/CAD is trading at 1.2884, up 0.30% on the day. On the release front, there are no Canadian releases on the schedule. The US releases Advance GDP and the UoM Consumer Sentiment.

It has been a dismal week for the Canadian dollar, which has dropped 2.0 percent. The Canadian dollar lost more ground against the greenback on Thursday, after the ECB lowered its asset-purchase program, from EUR 60 billion to 30 billion/mth. The US dollar gained ground after dovish remarks from Mario Draghi. The ECB president said that the program would remain open-ended, which allows the ECB to extend QE beyond September 2018. Many investors were hoping that the ECB would be more hawkish and announce a termination date for the scheme.

There were no surprises from the Bank of Canada this week, as the Bank maintained the benchmark rate at 1.00 percent. In its rate statement, the Bank noted that wage growth levels remain weak, as there is slack in the labor market. Inflation pressure from wage growth remains muted, but the Bank did not provide a reason why inflation levels are so low. This problem is apparent south of the border as well, where a robust US economy and red-hot labor market has not translated into higher inflation. The cautious tone of the BoC did not impress investors, and the Canadian dollar shed close to 1.0 percent on Wednesday after the rate announcement.

All eyes are on the US Advance GDP release, which should be treated as a market-mover. The markets are forecasting a gain of 2.5%, after Preliminary GDP posted a sharp gain of 3.0%. US economic numbers remain strong, and the labor market is close to capacity. Despite the strong economy, inflation has not moved higher, and wage growth has been weaker than expected. The Federal Reserve remains perplexed by the lack of inflation, but Janet Yellen and other FOMC members have said that they expect inflation levels to move higher in the near future. The markets are convinced that the Fed will press the rate trigger in December, as the odds of a rate hike have soared in recent weeks. Currently, the likelihood a December hike is at 96%, according to CME FedWatch.

Dollar’s Rate Divergence Rally

USD/CAD Fundamentals

Friday (October 27)

• 8:30 US Advance GDP. Estimate 2.6%
• 8:30 US Advance GDP Price Index. Estimate 1.7%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 100.7
• 10:00 US Revised UoM Inflation Expectations

*All release times are GMT

*Key events are in bold

USD/CAD for Friday, October 27, 2017

USD/CAD Friday, October 27 at 7:45 EDT

Open: 1.2846 High: 1.2892 Low: 1.2844 Close: 1.2884

USD/CAD Technical

USD/CAD has posted slight gains in the Asian and European sessions.

• 1.2778 is providing support
• 1.2943 is the next resistance line
• Current range: 1.2778 to 1.2943

Further levels in both directions:

• Below: 1.2778, 1.2701, 1.2598
• Above: 1.2943, 1.3032 and 1.3126

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Friday session. Currently, long positions have a majority (54%), indicative of trader bias towards USD/CAD continuing to move to higher ground.

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