USD/CAD – Little Change Ahead of Canadian CPI

USD/CAD has posted slight losses in Friday’s European session, as the pair trades at 1.3070. In economic news, Canada releases Core CPI, a key inflation indicator. The estimate stands at 0.3%. If Core CPI fails to meet expectations, the Canadian dollar could lose ground. There is only one US release on the schedule, Manufacturing PMI. Little change is expected in the October report.

The Bank of Canada did not lower interest rates earlier this week, as the rate remained at 0.50%. However, the Canadian dollar dropped sharply 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 the BOC from raising interest rate hikes, which would help boost the Canadian dollar.

There was positive news out of the US on Thursday, as Unemployment Claims, a key release, came in at 259 thousand, beating the estimate of 266 thousand. This was slightly higher than the previous reading of 255 thousand, but marked the third straight week that the indicator beat the forecast. The four-week moving average of claims, which reduces the volatility of the weekly jobless reports, is currently at its lowest level since 1973. These figures point to a stronger labor market, but the next big test comes in early November, with the publication of Nonfarm Payrolls. Meanwhile, Existing Housing Sales had a banner September, improving to 5.55 million, crushing the estimate of 5.38 million. We’ll get a look at additional housing indicators next week.

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. Next week promises to be interesting, as the Federal Reserve issues a policy statement after its meeting. This will be followed by the release of the Advance GDP report, a market-mover event.

USD/CAD Fundamentals

Friday (Oct. 23)

• 12:30 Canadian Core CPI. Estimate 0.3%
• 13:45 US Flash Manufacturing PMI. Estimate 52.8 points.

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Friday, October 23, 2015

USD/CAD October 23 at 11:20 GMT

USD/CAD 1.3070 H: 1.3111 L: 1.3051

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 no change on Friday, as long positions have a slight majority of positions (53%). This is indicative of a slight bias by traders towards USD/CAD 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.