USD/CAD – Canadian Dollar Sinks on BOC’s Pessimistic Growth Outlook

USD/CAD is steady in Thursday’s European session, trading at 1.3130. The Canadian dollar took a hit on Wednesday, as the pair jumped over 150 points following a pessimistic report from the Bank of Canada concerning the Canadian economy. On Thursday, there are two key releases – Canadian Core Retail Sales, with an estimate of 0.2%, and US Unemployment Claims, which are expected to rise to 266 thousand. Canada will release another major event, Core CPI, on Friday.

The Bank of Canada did not lower interest rates, but the Canadian dollar dropped sharply nonetheless, after the central bank painted a gloomy picture of the Canadian economy. The BOC noted that weak oil prices have had a negative impact on the export sector and hurt economic growth. The BOC released a monetary policy report which said that the Canadian economy will grow just 2 per cent in 2016 and 2.5 per cent in 2017, lower than the previous forecasts of 2.3 per cent and 2.6 per cent. Weak growth will serve to delay any interest rate hikes, which would boost the value of the Canadian dollar.

Recent US data has not been has strong as hoped, with key numbers sending a mixed message about the health of the economy. This has reduced the likelihood of a rate hike by the Federal Reserve before the end of 2015. The markets remain frustrated about the Fed’s lack of communication with the markets, as FOMC members continue to send out contradictory messages about the Fed’s plans. Still, an improvement in US numbers, especially employment and consumer indicators, could quickly revive speculation about a rate hike and boost the US dollar. This means that the upcoming US Unemployment Claims report will be carefully monitored, and an unexpected reading could have a sharp impact on the direction of GBP/USD. The estimate stands at 266 thousand, higher than the previous report of 255 thousand.

USD/CAD Fundamentals

Thursday (Oct. 22)

• 12:30 US Unemployment Claims. Estimate 266K
• 12:30 Canadian Core Retail Sales. Estimate 0.2%.
• 13:00 US HPI. Estimate 0.4%
• 14:00 US Existing Home Sales. Estimate 5.38M
• 14:00 US CB Leading Index. Estimate 0.0%
• 14:30 US Natural Gas Storage. Estimate 89B

Upcoming Releases

Friday (Oct. 23)

• 12:30 Canadian Core CPI. Estimate 0.3%

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Thursday, October 22, 2015

USD/CAD October 22 at 12:00 GMT

USD/CAD 1.3135 H: 1.3142 L: 1.3102

USD/CAD Technical

• USD/CAD has shown little movement in the Asian and European sessions.
• 1.3165 is a weak resistance line.
• 1.3063 has switched to a support role following the recent strong gains by USD/CAD.
• Current range: 1.3063 to 1.3165

Further levels in both directions:

• Below: 1.3063, 1.2930, 1.2798 and 1.2646
• Above: 1.3165, 1.3213 and 1.3327

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little change on Thursday, as long positions have a slight majority of positions (54%). This is indicative of a slight bias by traders towards USD/CAD continuing to move higher.

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