USD/CAD – Canadian Dollar Jumps on Soft Greenback, BoC Rate Statement Next

The Canadian dollar has posted strong gains in the Tuesday session. Early in North American trade, USD/CAD is trading at 1.3070. On the release front, there are no Canadian events on the schedule. In the US, the Empire State Manufacturing Index dipped to 6.5, short of the forecast of 8.1. Wednesday promises to be busy, with the US releasing CPI reports. In Canada, the BoC will set the benchmark rate, which is expected to remain at 0.50%.

With the US economy on track and the country celebrating a new president, the US consumer remains very optimistic. The UoM Consumer Sentiment in January was solid, although the markets had expected a stronger performance. The indicator was almost unchanged at 98.1, shy of the forecast of 98.6. Despite the optimism, US retail sales were a mix during the December holiday season. Retail Sales improved to 0.6%, edging above the estimate of 0.5%. However, much of the increase in spending was attributable to automobile sales, at the expense of other sectors of the economy. This was reflected in Core Retail Sales (which excludes car sales), which remained stuck at 0.2%, compared to a forecast of 0.5%. Still, analysts are confident that a bullish consumer will translate into strong spending numbers in the next few months. There was good news on the inflation front, as wholesale prices (measured by PPI) rose 0.3%, beating the forecast of 0.1%. This marked the third rise in four months, as inflation is pointing upwards due to higher oil prices. If inflation continues to climb towards the Federal Reserve target of 2.0%, we could see the Fed step in and raise interest rates. Last week, FOMC member Patrick Harker took note of the strong US economy and projected three “modest” rates from the Fed in 2017.  We’ll get another look at US inflation numbers on Wednesday, with the release of CPI and Core CPI.

It’s been a great start to 2017 for the Canadian dollar. The currency is climbed 2.7 percent in January and is within striking range of the symbolic 1.30 level. Strong crude prices remain above the $50 level and have buoyed the commodity-based Canadian dollar.  The markets are keeping an eye on the Bank of Canada, which will set the benchmark interest rate on Wednesday. The rate has been pegged at 0.50% since July 2015, and with plenty of slack in the Canadian economy, no change is expected the upcoming rate announcement.

Fed’s Harker Sees 3 Rate Hikes in 2017

USD/CAD Fundamentals

Tuesday (January 17)

• 8:30 US Empire State Manufacturing Index. Estimate 8.1. Actual 6.5
• 8:45 US FOMC Member William Dudley Speaks
• 10:00 US Treasury Secretary Jack Lew Speaks
• 10:00 US FOMC Member Lael Brainard Speaks

Wednesday (January 18)

• 8:30 US CPI. Estimate 0.3%
• 8:30 Core CPI. Estimate 0.2%
• 10:00 BoC Monetary Policy Report
• 10:00 BoC Rate Statement
• 10:00 BoC Overnight Rate. Estimate 0.50%
• 11:15 BoC Press Conference

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, January 17, 2017

USD/CAD January 17 at 8:40 EST

Open: 1.3176 High: 1.3189 Low: 1.3013 Close: 1.3070

USD/CAD Technical

• USD/CAD was down slightly in the Asian session and has posted strong losses in the European session
• 1.3003 has switched to a support role
• 1.3120 is the next resistance line

Further levels in both directions:

• Below: 1.3003, 1.2922 and 1.2815
• Above: 1.3120, 1.3253, 1.3371 and 1.3457
• Current range: 1.3003 to 1.3120

OANDA’s Open Positions Ratio

USD/CAD ratio is showing gains in long positions in the Tuesday session. This is consistent with strong downward movement from USD/CAD, which has covered some short positions. Currently, long positions have a majority (61%), indicative of trader bias towards USD/CAD reversing directions and moving higher.

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