USD/CAD – Canadian Dollar Unchanged, US Manufacturing Reports Next

The Canadian dollar remains subdued in the first week of 2017. Currently, USD/CAD is trading at 1.3440. On the release front, it’s a slow start to the week, with no Canadian releases on the schedule. In the US, today’s key event is ISM Manufacturing PMI, with the indicator expected to rise to 53.7 points. On Wednesday, the Federal Reserve will publish the minutes of its last policy meeting.

The spotlight will be on the Federal Reserve on Wednesday, with the release of the minutes from the December policy meeting, when the Fed finally raised rates for the first time since December 2015. Analysts will be combing through the minutes, looking for clues regarding future monetary policy. The US economy is performing very well, and the markets are hopeful that this continues as Donald Trump takes office. Trump’s economic policies remain sketchy, although he has promised to increase fiscal spending while lowering taxes. If the economy’s positive momentum continues in early 2017, the Fed could be inclined to raise rates another quarter point in order to prevent the economy from overheating. A rate hike would likely lead to broad gains for the US dollar.

Dollar Finds its Mojo

The Canadian dollar sagged in the second half of December, as it trades close to the 1.34 level. However, rising oil prices could be the just the tonic the currency needs, as Canada is a major oil exporter. In December, OPEC surprised the markets as members agreed to cut or limit production levels. This was quickly followed by a deal with Russia and other oil producers to cut production. These reductions took effect on January 1, so we could see oil prices continue to rise, provided that the countries bound by the agreement don’t cheat and over-produce, which has been a problem in the past. A strong US economy is good news for its northern neighbor, so the Canadian dollar is positioned to make gains in the early part of 2017.

USD/CAD Fundamentals

Tuesday (January 3)

• 9:45 US Final Manufacturing PMI. Estimate 54.2
• 10:00 US ISM Manufacturing PMI. Estimate 53.7
• 10:00 US Construction Spending. Estimate 0.5%
• 10:00 US ISM Manufacturing Prices. Estimate 55.6

Wednesday (January 4)

• 14:00 US FOMC Meeting Minutes

USD/CAD for Tuesday, January 3, 2017

USD/CAD January 3 at 7:05 EST

Open: 1.3440 High: 1.3458 Low: 1.3403 Close: 1.3450

USD/CAD Technical

• USD/CAD posted  losses in the Asian session but has recovered in European trade
• 1.3371 is providing support
• 1.3457 remains under pressure in resistance

Further levels in both directions:

• Below: 1.3371, 1.3253 and 1.3120
• Above: 1.3457, 1.3589, 1.3759 and 1.3889
• Current range: 1.3371 to 1.3457

OANDA’s Open Positions Ratio

USD/CAD ratio is showing slight gains towards short positions. Currently, short positions have a majority (57%). This is indicative of trader bias towards USD/CAD reversing directions and moving lower.

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