USD/CAD – Canadian Dollar Shrugs Off Improved Trade Balance

The Canadian dollar is unchanged in the Tuesday session. In North American trade, USD/CAD is trading at 1.3280. On the release front, Canada’s trade deficit narrowed to C$1.1 billion, smaller than the estimate of C$2.1 billion. In the US, there are no major events on the schedule. In the US, the trade deficit jumped to $42.6 billion, worse than the forecast of $41.5 billion. Later in the day, we’ll get a look at Factory Orders. On Wednesday, the BoC will set the benchmark interest rate, which is expected to remain unchanged at 0.50%.

Employment numbers were on center stage on Friday, as both Canada and the US released key employment indicators. In the US, the readings were a mix. Nonfarm Payrolls improved to 178 thousand, edging above the forecast of 177 thousand. This marked a 4-month high. However, Average Hourly Earnings, which measures wage growth, surprised with a decline of 0.1%, short of the estimate of 0.2%. This was the first decline in wage growth since March. The unemployment rate dropped to just 4.6%, well below the forecast of 4.9%. The decrease in labor market slack is likely to put more pressure on inflation levels, which remain weak despite a strong economy. Preliminary GDP expanded at a clip of 3.2% in the third quarter, beating the estimate of 3.0%. Canadian employment indicators were solid, as Employment Change gained 10.7 thousand, much better than the estimate of -16.5 thousand. As well, the unemployment rate dropped to 6.8%, below the forecast of 7.0%. The Canadian dollar responded with gains on Friday, as USD/CAD dropped to 1.3254, its lowest level since mid-October.

The Canadian dollar enjoyed an excellent week, posting gains of 2.0%. The currency posted strong gains on Thursday, responding positively to the unexpected news that OPEC had reached an agreement to cut crude production levels. One of the major sticking points had been Iran’s insistence to maintain output at pre-sanction levels. Saudi Arabia accepted Iran’s demand, paving the path for the first production agreement by OPEC since 2008. Oil prices jumped on the news and the Canadian dollar, which is sensitive to movement in oil prices, posted gains as well. The rally continued on Friday, as Canadian employment numbers beat expectations.

USD/CAD Fundamentals

Tuesday (December 6)

• 8:30 Canadian Trade Balance. Estimate -2.1B. Actual -1.1B
• 8:30 US Revised Nonfarm Productivity. Estimate 3.2%. Estimate 3.1%
• 8:30 US Trade Balance. Estimate -41.5B. Actual -42.6B
• 8:30 US Revised Unit Labor Costs. Estimate 0.4%. Actual 0.7%
• 10:00 US Factory Orders. Estimate 2.5%
• 10:00 US IBD/TIPP Economic Optimism. Estimate 52.3
• 10:00 Canadian Ivey PMI. Estimate 59.9

Wednesday (December 7)

• 10:00 BoC Rate Statement
• 10:00 BoC Overnight Rate. Estimate 0.50%

*All release times are EST

*Key events are in bold

USD/CAD for Tuesday, December 6, 2016

USD/CAD December 6 at 8:45 EST

Open: 1.3274 High: 1.3284 Low: 1.3249 Close: 1.3280

USD/CAD Technical

• USD/CAD showed limited movement in the Asian and European sessions.
• 1.3253 remains a weak support line
• 1.3371 is the next resistance line

Further levels in both directions:

• Below: 1.3253, 1.3120 and 1.3026
• Above: 1.3371, 1.3457, 1.3551 and 1.3648
• Current range: 1.3253 to 1.3371

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Tuesday session. Currently, short and long positions are almost evenly split , indicative of a lack of trader bias as to what direction USD/CAD will take next.

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.