USD/CAD – Higher on Dovish Fed Minutes, Eye on Candian Job Numbers

The Canadian dollar has posted gains on Friday, as the pair trades slightly above the 1.29 line in the European session. Taking a look at economic releases, Canada will release key employment numbers later in the day – Employment Change and the Unemployment Rate. Later today, the BOC issues its Business Outlook Survey. In the US, the lone economic release is Import Prices.

The Federal Reserve released the minutes of its most recent policy meeting on Thursday. The minutes indicated that the Fed does not feel that the timing is appropriate for a rate hike, but provided few clues as to when the Fed might take action. Policymakers cited concerns that the sluggish global economy could affect the US economy. Last week’s dismal Nonfarm Payrolls may have been a factor in the Fed’s dovish statement, and the likelihood has risen that the Fed will not take action before 2016. Still, if the US rebounds with some strong numbers, speculation about an imminent rate hike could rise, and the dollar could benefit and move higher against its rivals.

The Canadian dollar has shown some impressive strength lately. The currency is trading around the 1.29 line, a gain of close to 500 points since the end of September. Why the sudden surge by the loonie? A strong case can be made that the value of the Canadian dollar is closely linked to oil prices, as the commodity is one of Canada’s major exports. USD/CAD was as low as 1.22 in June, prior to the crash of oil on global markets. It’s been a rocky ride for the loonie since then, as the price of oil dropped to multi-year lows. However, oil prices have now rebounded and reached their highest levels since mid-August, which has given the Canadian dollar a big boost. A report this week from the US Energy Information Agency said that the global surplus of crude is expected to ease, which should help stabilize oil prices. This would  be very good news for the loonie, which has struggled in the second half of 2015.

USD/CAD Fundamentals

Upcoming Key Events

Friday (Oct. 9)

• 12:30 Canadian Employment Change

This is one of the most important economic indicators, and an unexpected reading could have a sharp impact on USD/CAD. The indicator posted an excellent gain of 12.0 thousand in August, crushing the estimate of -4.8 thousand. The markets are expecting another strong gain in September, with the estimate standing at 10.5 thousand. If the indicator matches or beats the estimate, we could see the Canadian dollar take advantage and post gains. The unemployment rate, which currently stands at a round 7.0%, is expected to dip to 6.9% in the September report.

• 12:30 US Import Prices. Estimate -0.5%.
• 13:10 Fed FOMC Member Denis Lockhart Speaks
• 14:30 Bank of Canada Business Outlook Survey

The BOC releases this report each quarter. It is based on a survey of about 100 businesses, which are asked about their hiring, spending and investment plans. Analysts keep close tabs on this report, as the business sector is one of the key drivers of the Canadian economy. A report which points to optimism on the part of Canadian businesses could give a boost to the Canadian dollar.

• 17:30 Fed FOMC Member Charles Evans Speaks

The markets will be listening closely to remarks on Friday from the two FOMC members, which come on the heels of the Federal Reserve’s minutes. Any hints about a rate hike could bolster the US dollar.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Friday, October 9, 2015

USD/CAD October 9 at 11:50 GMT

USD/CAD 1.2934 H: 1.3000 L: 1.2900

USD/CAD Technical

• USD/CAD was uneventful in the Asian session, and has posted gains in European trading.
• 1.2930 was tested earlier and is under strong pressure in support.
• 1.3063 has some breathing room as a resistance line.
• Current range: 1.2930 to 1.3063

Further levels in both directions:

• Below: 1.2930, 1.2798, 1.2646 and 1.2552
• Above: 1.3063, 1.3165, 1.3213 and 1.3310

OANDA’s Open Positions Ratio

USD/CAD ratio is showing no movement on Friday, continuing the trend we saw a day earlier. The ratio has a majority of long positions (54:46), indicative of slight trader bias towards the Canadian dollar continuing to move higher.

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.