USD/CAD – Canadian Dollar Down, Canadian Trade Surplus Misses Mark

USD/CAD has posted strong gains in the Tuesday session, continuing the gains which marked the Monday session. Currently, the pair is trading at 1.3170. On the release front, Canada’s trade surplus rose to C$0.9 billion, short of the estimate of C$1.2 billion. Canadian Building Permits dropped 6.6%, worse than the forecast of -3.5%. Later, in the day, Canada releases Ivey PMI, which is expected to post a strong reading of 58.3. In the US, the trade deficit narrowed to $44.3 billion, beating the forecast of $45.0 billion. On the employment front, JOLTS Jobs Openings is expected to improve to 5.56 million.

President Donald Trump has just started his term, but he continues to create controversy and his protectionist rhetoric is not endearing him to the markets. Moreover, the lack of an economic policy from the new administration is a major source of concern and the the post-election euphoria which sent the markets higher has dissipated. The Federal Reserve, which had trumpeted that it was planning a series of hikes in 2017 (sound familiar?), was more cautious in its recent rate statement and is expected to adopt a wait-and-see attitude in the coming months. If the economy continues to grow, there is a strong likelihood of another rate hike in the first half of 2017, which is bullish for the dollar. On the other hand, if Trump makes good on his promises to “make America first” and implement protectionist policies, the greenback could lose ground against major currencies.

Donald Trump’s promise of “America First” includes revisiting the NAFTA trade agreement, which has been an anchor of the US-Canada trade relationship for over 20 years. Trump didn’t mince words last week when describing NAFTA, saying that “NAFTA has been a catastrophe for our country. It’s been a catastrophe for our workers and our jobs and our companies.” Although Trump is unlikely to unravel the agreement, his protectionist stance could spell trouble for the Canadian economy. With 70% of Canadian exports headed for the US, changes to NAFTA could unnerve the markets and weaken the Canadian dollar.

Trump Reiterates His Willingness to Renegotiate NAFTA

USD/CAD Fundamentals

Tuesday (February 7)

• 8:30 Canadian Trade Balance. Estimate 1.2B. Actual 0.9B
• 8:30 Canadian Building Permits. Estimate -3.5%. Actual -6.6%
• 8:30 US Trade Balance. Estimate 45.0B. Actual 44.3B
• 10:00 Canadian Ivey PMI. Estimate 58.3
• 10:00 US JOLTS Job Openings. Estimate 5.56M
• 10:00 US IBD/TIPP Economic Optimism. Estimate 5.56M
• 15:00 US Consumer Credit. Estimate 20.3B

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, February 7, 2017

USD/CAD February 7 at 8:50 EST

Open: 1.3084 High: 1.3212 Low: 1.3075 Close: 1.3171

USD/CAD Technical

• USD/CAD was flat in the Asian session and posted sharp gains in European trade
• 1.3120 is providing support
• 1.3253 is the next resistance line

Further levels in both directions:

• Below: 1.3120, 1.3003, 1.2922, 1.2815 and 1.2653
• Above: 1.3253, 1.3371 and 1.3461
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is showing gains in short positions. Currently, long positions have a slender majority (51%), 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.