USD/CAD – Canadian Dollar Trading Sideways as Middle East Tensions in Focus

The Canadian dollar is showing limited movement in the Thursday session. Currently, USD/CAD is trading at 1.2593, up 0.10% on the day. In economic news, it’s a quiet day on both sides of the border. US unemployment claims is expected to fall to 231 thousand. In Canada, the New Housing Price Index is forecast to edge up to 0.1%. On Friday, the US releases UoM Consumer Sentiment.

The Canadian dollar has flexed some muscle this week, but the minor currency could face some turbulence, as the markets are braced for a US strike against Syria. This follows an alleged chemical attack by Syrian forces against rebels, and a UN Security Council meeting ended inconclusively after Russia cast a veto on a US proposal to probe the attack. US President Trump has warned that a US response is imminent, while Russia has countered that it will respond to any US move. Matters could get very nasty if Trump makes good on his promise, as investor risk appetite could sink and drag down minor currencies such as the Canadian dollar.

There were no surprises in the Federal Reserve minutes, but the generally hawkish tone has helped support the US dollar. All of the Fed policymakers indicated that the US economy would continue to improve and that inflation would rise in the next few months. At the March meeting, the Fed unanimously voted to raise rates by a quarter-point, bringing the benchmark rate to a range between 1.50% and 1.75%. The Fed projection for rate policy in 2018 remains at three hikes, although there is speculation that the Fed could revise the forecast to four rate hikes. Last week, Fed Chair Jerome Powell said that the Fed would likely continue to raise rates in order to keep a lid on inflation, but added that the rate moves would be gradual. A new headache for the Fed is the escalating trade battle between the US and China, which could hurt the economy and raise consumer prices. As for the next two rate meetings, the markets expect Powell & Co. to sit tight in May and raise rates at the June meeting.

The Bank of Canada Business Outlook Survey was released earlier this week. The survey pointed to a generally upbeat business sector and has helped boost the Canadian dollar. The survey found widespread intention by companies to increase investment and hiring, and “forward-looking sales indicators remain positive across most regions and sectors”. Still, the report is unlikely to change the current sentiment that the BoC will not raise rates at next week’s policy meeting.

USD/CAD Fundamentals

 Thursday (April 12)

• 8:30 US Unemployment Claims. Estimate 231K
• 8:30 Canadian NHPI. Estimate 0.1%

 Friday (April 13)

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 100.6

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, April 12, 2018

USD/CAD, April 12 at 8:50 EST

Open: 1.2581 High: 1.2616 Low: 1.2562 Close: 1.2593

USD/CAD Technical

USD/CAD ticked higher in the Asian session. In the European session, the pair posted slight gains but has retracted

• 1.2590 is under pressure in support
• 1.2687 is the next resistance line
• Current range: 1.2590 to 1.2687

Further levels in both directions:

• Below: 1.2590, 1.2496 and 1.2397
• Above: 1.2687, 1.2757, 1.2850 and 1.2930

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Thursday session. Currently, long positions have a majority (57%), indicative of USD/CAD reversing directions and moving lower.

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.