USD/CAD – Canadian Dollar Ticks Higher, Markets Await US Inflation Reports

The Canadian dollar continues to trade sideways this week. In the Wednesday session, the pair is trading at 1.2576, down 0.14% on the day. On the release front, there are no Canadian indicators for a third straight day. In the US, the markets are expecting mixed inflation numbers. Core CPI is expected to expected to edge lower to 0.2%, while CPI is forecast to improve to 0.1%. The US will also release retail sales reports. Retail Sales is forecast to slow to 0.2%, while Core CPI is forecast to accelerate to 0.5%. Traders should be prepared for movement on the currency markets during the North American session.

It’s been a rough February for the Canadian dollar, which has declined 2.4%. The loonie lost ground during last week’s massive sell-off in the stock markets, as nervous investors lost their risk appetite and scurried away from minor currencies such as the Canadian dollar. However, the country’s economic fundamentals remain solid, and the Bank of Canada is expected to raise rates twice more this year, after hiking rates in January. If oil prices remain high and the economy remains strong, there is room for the Canadian dollar to gain ground. However, there are some worrying clouds not too far off. These include uncertainties over the NAFTA trade agreement and the possibility that the Federal Reserve will accelerate the pace of its rate hikes, putting more pressure on the Canadian dollar.

Global stock markets have steadied after last week’s turbulence, but investors remain wary. Wednesday’s US inflation numbers will be closely watched, as inflation fears was a key catalyst of the massive sell-off. The new head of the Federal Reserve, Jerome Powell, sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

USD/CAD Fundamentals

Wednesday (February 14)

  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Core Retail Sales. Estimate 0.2%
  • 8:30 US Retail Sales. Estimate 0.5%

Thursday (February 15)

  • 8:30 Canadian ADP Non-Farm Employment Change
  • 8:30 US PPI. Estimate 0.4%
  • 8:30 US Empire State Manufacturing Index. Estimate 17.7
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.5
  • 8:30 US Unemployment Claims. Estimate 229K

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, February 14, 2018

USD/CAD, February 14 at 8:05 EST

Open: 1.2593 High: 1.2599 Low: 1.2561 Close: 1.2576

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2190 1.2351 1.2494 1.2630 1.2757 1.2855

USD/CAD edged lower in the Asian session and is showing limited movement in the European session

  • 1.2494 is providing support
  • 1.2630 is providing resistance
  • Current range: 1.2494 to 1.2630

Further levels in both directions:

  • Below: 1.2494, 1.2351, 1.2190 and 1.2060
  • Above: 1.2630, 1.2757 and 1.2855

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session. Currently, long and short positions are evenly split, indicative of a lack of trader bias towards as to what direction USD/CAD takes next.

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.