USD/CAD – Canadian Dollar Continues Rally, US Jobless Claims Sparkles

The Canadian dollar has posted strong gains on Thursday, continuing the upward movement we saw on Wednesday following the Federal Reserve decision. Currently, USD/CAD is trading at the 1.30 line. On the release front, US unemployment claims impressed, dropping to 252 thousand, its lowest level since mid-April. Later in the day, the US releases existing house sales. There are no Canadian indicators on the schedule.

USD/CAD continues to lose ground this week, as the Canadian dollar has improved 1.4 percent. The greenback has sustained broad losses since the Fed decision on Wednesday, and the Canadian currency has joined the bandwagon. The Canadian dollar has also received a boost from higher oil prices. US crude has climbed 3.8 percent this week, buoyed by a sharp drawdown in crude inventories of 6.2 million barrels. On Friday, Canada releases CPI and retail sales reports. Any readings which catch the market by surprise could lead to volatility from the Canadian dollar.

All eyes were on the Federal Reserve announcement on Wednesday. As widely expected, the bank maintained the benchmark interest rate at 0.25%, where it has been pegged since last December. In a highly unusual step, however, three of the ten FOMC members dissented with the decision. Esther George, Loretta Mester and Eric Rosengren voted against holding rates steady, preferring to raise rates immediately by a quarter-percentage point. This was the first time since December 2014 that three FOMC voting members have dissented with the Fed rate decision. This significant dissent underscores that Janet Yellen has been unable to “rally the troops” behind her leadership, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”.

The Fed statement noted strong growth in employment and consumer spending, but added that business fixed investment remains weak. The Fed’s “dot plot” indicated that policymakers expect a quarter-rate hike before the end of the year. The Fed’s current stance is being called a “hawkish hold” as the Fed has put the markets on notice that a December rate hike is likely. Using typically bland language, the Fed stated that “the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Reading between the lines, the Fed is looking for stronger inflation numbers, and upcoming inflation indicators (as well as consumer spending and employment) will have a significant impact on the odds of a December rate hike. The Fed sounded dovish about future rate moves, scaling back projections for 2017 from three rate moves to just two hikes.

USD/CAD Fundamentals

Thursday (September 22)

  • 8:30 US Unemployment Claims. Estimate 261K. Actual 252K
  • 9:00 US HPI. Estimate 0.3%
  • 10:00 US Existing Home Sales. Estimate 5.45M
  • 10:00 US CB Leading Index. Estimate 0.0%
  • 10:30 US Natural Gas Storage. Estimate 59B

Friday (September 23)

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

* Key releases are in bold

*All release times are EDT

USD/CAD for Thursday, September 22, 2016

USD/CAD September 22 at 8:40 GMT

Open: 1.3083 High: 1.3087 Low: 1.3007 Close: 1.3004

USD/CAD Technical

S1 S2 S1 R1 R2 R3
1.2711 1.2815 1.2922 1.3028 1.3120 1.3253
  • USD/CAD continues to lose ground and break below support levels
  •  1.3028 was tested earlier in resistance and is a weak line
  • 1.2922 is providing support

Further levels in both directions:

  • Below: 1.2922, 1.2815 and 1.2711
  • Above: 1.3028, 1.3120, 1.3253 and 1.3371
  • Current range: 1.2922 to 1.3028

OANDA’s Open Positions Ratio

USD/CAD ratio has shown gains towards long positions. Currently, short positions have a strong majority (67%), indicative of trader bias towards USD/CAD continuing to move downwards.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.