USD/CAD – Canadian Dollar Under Pressure as US Inflation Dips

The Canadian dollar has posted more gains on Tuesday, but the currency is under pressure in the North American session. USD/CAD is currently trading at 1.2840. On the release front, it’s a busy day. Canadian Manufacturing Sales gained 0.8% in June, matching the forecast. This was an impressive rebound after a decline of 1.0% in the May release. In the US, CPI posted a flat reading of 0.0%, while Core CPI gained 0.1%. Building Permits came in at 1.15 million, very close to the forecast. On Wednesday, the FOMC will publish the minutes of its July policy meeting.

In the US, inflation numbers remain anemic. CPI came in at 0.0%, matching the forecast. This marked the first time the key index has failed to post a monthly gain since February, and will raise concerns of deflation in the economy. Core CPI posted a negligible gain of 0.1%, shy of the estimate of 0.2%. The disappointing consumer inflation data, which comes on the heels of soft retail sales reports, makes it very unlikely that the Fed will raise rates in September. Strong employment numbers, led by a stellar NFP report, had raised the odds of a September hike. The Fed has made it clear that any decision to raise rates will be data dependent, so it’s hard to see a case for a rate hike next month, with inflation levels close to zero. This means that we can expect the Federal Reserve to remain on the sidelines until December or even later.

The Canadian dollar had an excellent week, climbing 270 points. The loonie shrugged off weak Canadian numbers (Building Permits plunged 5.5% and NHPI missed the estimate) and instead piggybacked on crude, which rose following reports of a tighter oil market. Last week, the well-respected International Energy Agency (IEA) projected that oil supplies will decrease in the third quarter, despite record pumping levels from OPEC in July. The IEA added that although oil prices have dropped recently, its balances do not show an oversupply in the second of 2016, and that it expects demand to increase in the third quarter. As well, OPEC members are planning to meet in Algiers in late September, and if an agreement to curb prices is reached, supplies would be reduced and crude prices would move upwards. The Canadian dollar has gained another 1.0 percent against the greenback this week, as the loonie trades at its highest level since June 24.

USD/CAD Fundamentals

Tuesday (August 16)

  • 8:30 Canadian Manufacturing Sales. Estimate 0.8%. Actual 0.8%
  • 8:30 US Building Permits. Estimate 1.16M. Actual 1.15M
  • 8:30 US CPI. Estimate 0.0%. Actual 0.0%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
  • 8:30 US Housing Starts. Estimate 1.18M. Actual 1.21M
  • 9:15 US Capacity Utilization Rate. Estimate 75.7%
  • 9:15 US Industrial Production. Estimate 0.2%. 

Wednesday (August 17)

  • 14:00 US FOMC Meeting Minutes

* Key releases are in bold

*All release times are GMT

USD/CAD for Tuesday, August 16, 2016

USD/CAD August 16 at 8:30 GMT

Open: 1.2928 High: 1.2934 Low: 1.2798 Close: 1.2837

USD/CAD Technical

S1 S2 S1 R1 R2 R3
1.2562 1.2653 1.2780 1.2900 1.2990 1.3081
  • USD/CAD was flat in the Asian session. The pair has posted losses in European trade but has moved upwards in the North American session
  •  1.2780 is providing support
  • 1.2900 has switched to resistance following losses by USD/CAD on Tuesday

Further levels in both directions:

  • Below: 1.2780, 1.2653 and 1.2562
  • Above: 1.29, 1.2990, 1.3081 and 1.3219
  • Current range: 1.2780 to 1.2900

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement on Tuesday. long positions have a strong majority (62%), indicative of trader bias towards USD/CAD moving to higher levels.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.