USD/CAD – Canadian Dollar Slips as BoC Holds Off

The Canadian dollar has paused in the Thursday session, after sharp losses on Wednesday. Currently, USD/CAD is trading at 1.2793, down 0.03% on the day. On the release front, there are no Canadian releases on Thursday. The US releases two key indicators – unemployment claims and Pending Home Sales. On Friday, the US releases Advance GDP and the UoM Consumer Sentiment.

There were no surprises from the Bank of Canada, which maintained the benchmark rate at 1.00 percent. In its rate statement, the Bank noted that wage growth levels remain weak, as there is slack in the labor market. Inflation pressure from wage growth remains muted, but the Bank did not provide a reason why inflation levels are so low. This problem is apparent south of the border as well, where a robust US economy and red-hot labor market has not translated into higher inflation. The cautious tone of the BoC did not impress investors, and the Canadian dollar shed close to 1.0 percent on Wednesday after the rate announcement.

Who will win the race to take over at the Federal Reserve? Janet 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

Thursday (October 26)

• 8:30 US Unemployment Claims. 235K
• 8:30 US Goods Trade Balance. Estimate -63.8B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%
• 10:00 US Pending Home Sales. Estimate 0.2%
• 10:30 US Natural Gas Storage. Estimate 61B

Friday (October 27)

• 8:30 US Advance GDP. Estimate 2.5%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 100.7

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, October 26, 2017

USD/CAD Thursday, October 26 at 7:55 EDT

Open: 1.2797 High: 1.2811 Low: 1.2783 Close: 1.2793

USD/CAD Technical

USD/CAD was flat in the Asian session. In European trade, the pair ticked higher but then retracted

• 1.2778 is a weak support level
• 1.2943 is the next resistance line
• Current range: 1.2778 to 1.2943

Further levels in both directions:

• Below: 1.2778, 1.2701, 1.2598
• Above: 1.2943, 1.3032 and 1.3126

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Thursday session. Currently, long positions have a majority (56%), indicative of trader bias towards USD/CAD breaking out and moving 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.