USD/CAD – Canadian Dollar Dips to 3-Week Low, Trade Balance Next

USD/CAD continues to gain ground this week. In the Tuesday session, the pair has reached a high of 1.3447, its highest level since March 15. On the release front, Canada and the US will both release Trade Balance. Canada’s trade surplus is expected to edge lower to C$0.7 billion. In the US, the trade deficit is forecast to narrow to $46.0 billion.

Canada’s GDP expanded 0.6 percent, above the forecast of 0.3 percent. This marked a 7-month high for GDP, and raises hopes that a strong US economy will boost its northern neighbor. Although the Canadian economy has been churning out decent numbers, lower oil prices have had a negative impact on the Canadian economy and also weighed on the Canadian dollar, which continues to lose ground. Later in the week, we’ll get a look at Canadian Employment Change, which is expected to post a modest gain of 5.7 thousand.

The US economy hasn’t missed a beat in 2017, and the markets are expecting strong data for the first quarter. The CB consumer confidence report soared to 125.6 in March, and strong consumer confidence levels should translate into increased consumer spending, a key component of economic growth. GDP for the fourth quarter was revised to 2.1%, up from 1.9% in the previous GDP report. With the economy headed in the right direction, the discussions around the monetary policy tables are not whether the Fed will raise rates, but will it press the rate trigger two or three more times in 2017. The markets will be paying close attention to the minutes of the March meeting, when the Fed raised rates by a quarter-point, to a range of 0.75-1.00%. Any hints about the timing of the next hike, as well as the tone of the minutes are factors which could move the currency markets on Wednesday. The markets considered the rate statement overly cautious, and this sentiment sent the US dollar broadly lower. If the reaction to the minutes is one of disappointment, the dollar could again head downwards.

USD/CAD Fundamentals

Tuesday (April 4)

• 8:30 Canadian Trade Balance. Estimate 0.7B
• 8:30 US Trade Balance. Estimate -46.0B
• 10:00 US Factory Orders. Estimate 1.0%
• 10:00 US IBD/TIPP Economic Optimism. Estimate 53.2
• 4:30 US FOMC Member Daniel Tarullo Speech

Upcoming Key Events

Wednesday (April 5)

• 8:15 US ADP Nonfarm Employment Change. Estimate 191K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 57.1
• 14:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, April 4, 2017

USD/CAD April 4 at 6:50 EST

Open: 1.3384 High: 1.3447 Low: 1.3375 Close: 1.3424

USD/CAD Technical

• USD/CAD was flat in the Asian session and has posted gains in European trade
• 1.3371 switched to a support role following gains by USD/CAD in the Monday session
• 1.3461 remains a weak resistance line

Further levels in both directions:

• Below: 1.3371, 1.3253, 1.3120 and 1.3006
• Above: 1.3461, 1.3551 and 1.3672
• Current range: 1.3371 to 1.3461

OANDA’s Open Positions Ratio

USD/CAD ratio is showing gains towards short positions. Currently, short positions have a majority (61%), indicative of trader bias towards USD/CAD reversing directions and moving higher.

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