USD/CAD – Loonie Listless Ahead of US Retail Sales, Consumer Confidence

The Canadian dollar is showing limited movement on Friday, as the pair trades at the 1.32 line. On the release front, there are no Canadian releases on the schedule. It promises to be a busy day in the US, with the release of retail sales, PPI and UoM Consumer Confidence. The markets are expecting higher readings from these indicators, and if these forecasts are correct, we could see the US dollar post broad gains in the North American session.

There was more good news from the US labor market, as unemployment claims sparkled again last week. The key indicator dropped to 246 thousand last week, down slightly from 249 thousand a week earlier. The estimate stood at 252 thousand, marking a tenth consecutive week that the indicator has beaten the forecast. Strong job numbers is one of the main arguments of proponents of a rate hike in December, as the labor market, which is close to capacity, continues to fuel steady economic growth.

There were no dramatic comments in the Federal Reserve minutes, but the minutes did underscore the division within the FOMC concerning monetary policy. This was already apparent in the September rate vote, when three members voted against the decision to maintain rates at 0.25 percent. The minutes indicated that some of the members who voted to hold rates chose to fall in line with Janet Yellen, but are in favor of raising rates “relatively soon”. The members in favor of a rate hike believe that ultra-low rates could lead to overly low unemployment levels which could result in inflation rising too quickly. Other policymakers argue that the there is still slack in the labor market, despite the official numbers, and leaving rates on hold could attract more people back into the work force and avoid a spike in inflation. Since there is significant support within the Fed (and the markets) for a rate hike in December, Janet Yellen will be under pressure to press the rate trigger in December. The markets have priced in a December hike at 60 percent and the positive sentiment could help the US dollar continue to move higher. The Fed will next meet in November, but analysts don’t expect a rate move just a week before the presidential election.

USD/CAD Fundamentals

Friday (October 14)

• 8:30 US Core Retail Sales. Estimate 0.4%
• 8:30 US PPI. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.6%
• 8:30 US Core PPI. Estimate 0.1%
• 8:30 US FOMC Member Eric Rosengren Speaks
• 10:00 US Business Inventories. Estimate 0.1%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 92.1
• 10:00 US Preliminary UoM Inflation Expectations
• 13:30 US Federal Chair Janet Yellen Speaks
• Tentative – Federal Budget Balance. Estimate 30.0B

*All release times are EDT

*Key events are in bold

USD/CAD for Friday, October 14, 2016

USD/CAD October 14 at 6:20 GMT

Open: 1.3202 High: 1.3220 Low: 1.3182 Close: 1.3197

USD/CAD Technical

• USD/CAD has shown limited movement in the Asian and European sessions
• 1.3120 is providing strong support
•  There is resistance at 1.3253

Further levels in both directions:

• Below: 1.3120, 1.3028 and 1.2922
• Above: 1.3253, 1.3371, 1.3457 and 1.3551
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio has shown gains in long positions. Currently, short positions have a majority (55%), indicative of trader bias towards USD/CAD breaking out and moving lower.

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