USD/CAD – Canadian Dollar Dips, Manufacturing Sales Next

The Canadian dollar has posted considerable losses on Wednesday. Currently, USD/CAD is trading slightly below the 1.35 line. On the release front, Canada will publish Manufacturing Sales, with the markets braced for a decline of 0.2%. The US will release PPI, with the key inflation index expected to remain unchanged at 0.3%. On Thursday, there are a host of major US events, led by CPI. As well, Fed chair Janet Yellen will testify before the Congressional Joint Economic Committee.

As the markets brush off the dust from last week’s election shocker, what can we expect from President Trump? The markets went on a roller-coaster ride after the election, but appear to have settled down. Market sentiment is currently very favorable towards the dollar, as a Trump presidency (together with a Republican-controlled Congress) could signal a looser fiscal policy and a cut in taxes. This would likely result in greater inflation, which would lead to higher interest rates and hence a stronger dollar. At the same time, Trump is a political enigma, and aside from being “pro-business” he has been very short on specifics with regard to an economic platform. This lack of certainty means the markets could be in for plenty of surprises which could translate into volatility in the currency markets. The Canadian dollar has lost ground since the election and USD/CAD climbed close to the 1.36 line, its highest level since late February.

With the Federal Reserve meeting for a policy next month, expectations are sky-high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at a remarkable 90 percent, so barring some sharp negative data out of the US, we’ll see a rate hike before the end of 2016.

Fed Hike Odds Near 100%

USD/CAD Fundamentals

Wednesday (November 16)

• 3:05 US FOMC Member James Bullard Speech
• 8:30 Canadian Manufacturing Sales. Estimate -0.2%
• 8:30 US PPI. Estimate 0.3%
• 8:30 US Core PPI. Estimate 0.2%
• 9:15 US Capacity Utilization Rate. Estimate 75.5%
• 9:15 US Industrial Production. Estimate 0.2%
• 10:00 US NAHB Housing Market Index. Estimate 63 points
• 10:30 US Crude Oil Inventories. Estimate 0.4M
• 12:05 BoC Deputy Governor Timothy Lane Speech
• 16:00 US TIC Long-Term Purchases. Estimate 32.9B

Thursday (November 17)

• 8:30 US Building Permits. Estimate 1.19M
• 8:30 US CPI. Estimate 0.4%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
• 8:30 US Unemployment Claims. Estimate 257K
• 10:00 US Fed Chair Janet Yellen Testifies

*All release times are EST

*Key events are in bold

USD/CAD for Wednesday, November 16, 2016

USD/CAD November 16 at 7:50 EST

Open: 1.3455 High: 1.3506 Low: 1.3419 Close: 1.3480

USD/CAD Technical

• USD/CAD showed little movement in the Asian session and has recorded considerable gains in European trade.
• 1.3457 continues to provide strong support
• 1.3551 was tested earlier in resistance and remains a weak line

Further levels in both directions:

• Below: 1.3457, 1.3371, 1.3253 and 1.3120
• Above: 1.3551, 1.3648 and 1.3782
• Current range: 1.3457 to 1.3551

OANDA’s Open Positions Ratio

USD/CAD ratio is showing gains in long positions. Currently, short positions command a strong majority (62%), indicative of trader bias towards USD/CAD continuing to move to lower ground.

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.