USD/CAD – Canadian Dollar Unchanged, Investors Await NFP, Wage Growth Reports

The Canadian dollar has recorded small gains in the Thursday session. Currently, the pair is trading at 1.2318, up 0.02% on the day. On the release front, there are no major Canadian events. Over in the US, there are two key events. Unemployment claims are expected to rise to 237 thousand, and the markets are forecasting that ISM Manufacturing PMI will slow to 58.7 points. On Friday, the focus will be on US job reports, with the release of wage growth, nonfarm payrolls and the unemployment rate.

Will NAFTA survive past March? Negotiators are working against a self-imposed deadline to wrap up talks by March, with limited progress. The latest round of negotiations over NAFTA ended in Montreal last week, and there were no breakthroughs. Still, the sides continue to talk, and a Merrill Lynch has lowered the odds of the United States leaving the pact to 25 percent. The US has demanded far-reaching concessions from Canada and Mexico, such as shifting more auto production to the US. Canada and Mexico are strongly opposed to the US demands, but both economies would take a sharp hit if NAFTA is terminated. At the same time, many US businesses don’t want to blow up NAFTA and are pressuring President Trump to remain in the trade pact. The next round of negotiations is scheduled for late February in Mexico.

US Commerce Secretary Says NAFTA Far from Being Completed

The Federal Reserve held the course on interest rate policy on Wednesday, as expected. In the rate statement, policymakers said that they expected the economy to continue to expand at a moderate pace and that the labor market would remain strong in 2018. What was more noteworthy was that the Fed predicted that inflation would rise to the Fed’s 2 percent target this year. This marks an upgrade in the inflation forecast, as the December statement said that inflation was expected to “remain somewhat below 2 percent.” Higher inflation is likely to open the door to tighter monetary policy, and the Fed appears on track for three or even four rate hikes in 2018, assuming that the US economy remains strong. This policy meeting was the last under Janet Yellen, as Jerome Powell will take over as Fed chair on February 3. The slightly hawkish tone of the rate statement has raised the odds of a rate hike to 83% when the Fed next meets in March.

USD/CAD Fundamentals

Thursday (February 1)

• 7:30 US Challenger Job Cuts
• 8:30 US Preliminary Nonfarm Productivity. Estimate 0.8%
• 8:30 US Preliminary Unit Labor Costs. Estimate 0.9%
• 8:30 US Unemployment Claims. Estimate 237K
• 9:30 Canadian Manufacturing PMI
• 9:45 US Final Manufacturing PMI. Estimate 55.5
• 10:00 ISM Manufacturing PMI. Estimate 58.7
• 10:00 US Construction Spending. Estimate 0.4%
• 10:00 US ISM Manufacturing Prices. Estimate 68.3
• 10:30 US Natural Gas Storage. Estimate -102B
• All Day – US Total Vehicle Sales. Estimate 17.2M

Friday (February 2)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 181K
• 8:30 US Unemployment Rate. Estimate 4.1%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 95.0

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, February 1, 2018

USD/CAD, February 1 at 7:55 EDT

Open: 1.2316 High: 1.2332 Low: 1.2294 Close: 1.2317

USD/CAD Technical

USD/CAD was flat in the Asian session and has been choppy in European trade

• 1.2190 is providing support
• 1.2351 is the next resistance line
• Current range: 1.2190 to 1.2351

Further levels in both directions:

• Below: 1.2190, 1.2060 and 1.1903
• Above: 1.2351, 1.2494, 1.2630, and 1.2757

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged this week. Currently, long positions have a majority (59%), indicative of trader bias towards USD/CAD reversing directions and moving to higher ground.

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.