USD/CAD – Canadian Dollar Under Pressure Ahead of BoC Decision

The Canadian dollar continues to lose ground this week and has moved lower in the Wednesday session. Currently, USD/CAD is trading at 1.2701, up 0.21% on the day. On the release front, the Bank of Canada will set the benchmark rate and also release its quarterly monetary policy report. In the US, we’ll get a look at durable goods reports and New Home Sales. On Thursday, the US releases unemployment claims and Pending Home Sales.

The Canadian dollar slipped 1.3 percent last week against the greenback, and the downward trend has continued this week. Currently, the currency is at its lowest level since mid-August. Will the BoC rate decision end the slide? The markets are not expecting any move at the Wednesday meeting, and have priced in a 33% chance of a rate hike by the end of 2017. If, as expected, the Federal Reserve raises rates in December, the BoC will be under pressure to keep pace and also hike rates.

Will Janet Yellen bid adieu to the Federal Reserve? Yellen’s 3-year term concludes in February 2018, and President Trump has said he will nominate a new Fed in the next few days. The front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have a significant effect on monetary policy and the strength of the US dollar. If Taylor gets the nod, the US dollar could respond with gains of 3 percent or more.

 

USD/CAD Fundamentals

Wednesday (October 25)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Durable Goods Orders. Estimate 1.0%
  • 9:00 US HPI. Estimate 0.4%
  • 10:00 US New Home Sales. Estimate 555K
  • 10:00 BoC Monetary Policy Report
  • 10:00 BoC Rate Statement
  • 10:00 BoC Overnight Rate. Estimate 1.00%
  • 10:00 US New Home Sales. Estimate 556K
  • 10:30 US Crude Oil Inventories. Estimate -2.6M
  • 11:15 BoC Press Conference

Thursday (October 26)

  • 8:30 US Unemployment Claims. 235K
  • 10:00 US Pending Home Sales. Estimate 0.2%

*All release times are GMT

*Key events are in bold

 

USD/CAD for Wednesday, October 25, 2017

USD/CAD Wednesday, October 25 at 7:45 EDT

Open: 1.2675 High: 1.2723 Low: 1.2669 Close: 1.2701

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2302 1.2459 1.2598 1.2701 1.2778 1.2943

USD/CAD ticked upwards in the Asian session and has edged higher in European trade

  • 1.2598 is providing support
  • 1.2701 was tested in resistance earlier and is under strong pressure
  • Current range: 1.2598 to 1.2701

Further levels in both directions:

  • Below: 1.2598, 1.2459, 1.2302 and 1.2218
  • Above: 1.2701, 1.2778 and 1.2943

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session. Currently, long positions have a majority (58%), indicative of trader bias towards USD/CAD continuing to move to higher 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.