USD/CAD – Canadian Dollar Stems Slide, Crude Inventories Next

The Canadian dollar is almost unchanged on Wednesday, following sharp losses in the Tuesday session. Currently, USD/CAD is trading at 1.3160. On the release front, it’s another quiet day, with no major releases on the schedule. The lone Canadian event is a speech from BOC Senior Deputy Governor Carolyn Wilkins in London, England. The US will release Import Prices and Crude Oil Inventories. Traders should be prepared for some movement from USD/CAD on Thursday, as the US will releases a host of key indicators.

USD/CAD was up sharply on Tuesday, climbing 130 points. This gain followed the release of an International Energy Agency (IEA) report that the oil oversupply could extend into the middle of 2017. This assessment surprised the markets, as the IEA veered sharply from its report a month ago, when it projected that the market would not show any surplus for the rest of the year. The revised IEA report comes on the heels of an OPEC report on Monday, which projected the oil glut to continue into 2017 due to an increase in production from non-OPEC members. The markets will now shift focus to US crude supplies, which shocked the markets late last week with reading of -14.5 million barrels. US crude climbed to $47.50 after that release, but has since retracted to $45. Next up is US Crude Oil Inventories, with an estimate of +2.8 million barrels. If this release misses expectations, we could see some movement from USD/CAD.

With the Federal Reserve holding a crucial meeting on September 21, the markets have been paying even closer attention to recent comments from Fed policymakers. On Monday, FOMC member Lael Brainard sounded cautious, saying it would be prudent to maintain a loose monetary policy. Brainard noted global uncertainties and weak inflation as reasons for the Fed not to rush into raising rates. This dovish message was in marked contrast to remarks from FOMC member Eric Rosengren on Friday, who came out in support of a rate hike, without providing a timeline. Rosengren said that “tightening is likely to be appropriate”, and went as far as to say that the US economy could overheat if the Fed didn’t act soon. These mixed messages certainly haven’t clarified matters, leaving markets players in the dark as to the Fed’s monetary plans. However, they have led to plenty of movement in the odds of a rate hike, which moved higher after Rosengren’s speech, only to drop following Brainard’s comments. The likelihood of a September hike has dipped to 15%, while the odds of a December rate are down to 45%. The markets will have few fundamental cues to work with until Thursday and Friday, when the US will release retail sales, CPI and consumer confidence numbers. If these numbers are stronger than expected, the odds of a rate hike next week will move higher, and the US dollar could make headway against its rivals.

USD/CAD Fundamentals

Wednesday (September 14)

• 6:50 BOC Senior Deputy Governor Carolyn Wilkin
• 8:30 US Import Prices. Estimate -0.2%
• 10:30 US Crude Oil Inventories. Estimate 2.8M

Thursday (September 15)

• 8:30 US Core Retail Sales. Estimate 0.3%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Philly Fed Manufacturing Index. Estimate 1.1
• 8:30 US Retail Sales. Estimate -0.1%
• 8:30 US Unemployment Claims. Estimate 262K

* Key releases are in bold

*All release times are EDT

USD/CAD for Wednesday, September 14, 2016

USD/CAD September 14 at 6:50 GMT

Open: 1.3158 High: 1.3175 Low: 1.3127 Close: 1.3162

USD/CAD Technical

• USD/CAD has shown little movement in the Asian and European sessions
•  1.3120 is a weak support line
• There is resistance at 1.3253

Further levels in both directions:

• Below: 1.3120, 1.3028 and 1.2922
• Above: 1.3253, 1.3371 and 1.3457
• Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session, consistent with the lack of movement from USD/CAD. Currently, short positions have a strong majority (65%), indicative of trader bias towards USD/CAD moving to lower levels.

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