USD/CAD – Canadian Dollar Under Pressure, Markets Eye Trade Balance

The Canadian dollar has stabilized on Wednesday, after recording considerable losses in the Tuesday session. Currently, USD/CAD is trading just above the 1.32 line. On the economic front, Canada will release its trade balance for August, with the trade deficit expected to remain unchanged at C$2.5 billion. Over in the US, employment indicators will be in the spotlight during the latter half of the week, starting with ADP Nonfarm Employment Change on Wednesday. The indicator is expected to drop to 166 thousand. We’ll also get a look at ISM Non-Manufacturing PMI, with an estimate of 53.1 points.

The Fed remains divided over the timing of a rate hike, and this was underscored at the September meeting, when three of the ten FOMC members voted against the decision to hold rates at 0.25%, voting instead in favor of an immediate rate hike. On Tuesday, FOMC member Jeffrey Lacker, one of seven non-voting members, said that he would have voted in favor of a rate hike at the last meeting had he been able to vote. The strong dissent in the September rate decision has not helped the credibility of the Fed, which had promised a series of rate hikes in 2016, but has opted for the sidelines since its quarter-point hike last December. Continuing mixed messages from the Fed make it difficult for the markets to ascertain what the Fed has planned regarding monetary policy and whether it will press the rate trigger in December or wait until next year.

With the odds of a December rate hike priced in at about 55%, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge up to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the US dollar could pick up some ground against its rivals.

USD/CAD Fundamentals

Wednesday (October 5)

  • 8:15 US ADP Nonfarm Employment Change. Estimate 166K
  • 8:30 Canadian Trade Balance. Estimate -2.5B
  • 8:30 US Trade Balance. Estimate -41.1B
  • 9:45 US Final Services PMI. Estimate 51.9
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 53.1
  • 10:00 US Factory Orders. Estimate -0.4%
  • 10:30 US Crude Oil Inventories. Estimate 1.1M

Upcoming Key Events 

Thursday (October 6)

  • 8:30 US Unemployment Claims. Estimate 255K

* Key releases are in bold

*All release times are EDT

USD/CAD for Wednesday, October 5, 2016

USD/CAD October 5 at 7:30 GMT

Open: 1.3197 High: 1.3214 Low: 1.3170 Close: 1.3209

USD/CAD Technical

S1 S2 S1 R1 R2 R3
1.2922 1.3028 1.3120 1.3253 1.3371 1.3457
  • USD/CAD showed little movement in the Asian session. The pair has posted gains in the European session
  • 1.3120 is providing support
  •  There is resistance at 1.3253

Further levels in both directions:

  • Below: 1.3120, 1.3028, 1.2922 and 1.2815
  • Above: 1.3253, 1.3371 and 1.3457
  • Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is showing short positions with a strong majority (59%), indicative of trader bias towards USD/CAD reversing directions and moving 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.