USD/CAD – Canadian Dollar Unchanged, US GDP Next

The Canadian dollar is unchanged in the Wednesday session. Currently, USD/CAD is trading at 1.2775, down 0.02% on the day. The Canadian dollar has paused after Tuesday’s losses, but finds itself at its lowest level since late December. On the release front, Canada releases an important inflation indicator, the Raw Materials Price Index. This indicator is expected to post a strong gain of 1.8%. In the US, Preliminary GDP is expected to rise 2.5%, and Pending Home Sales is forecast to climb 2.4%. On Thursday, the US will publish unemployment claims, personal spending and manufacturing PMI. As well, Fed chair Jerome Powell testifies before the Senate Banking Committee. Canada will publish Current Account.

The US dollar showed broad gains after Federal Reserve Chair Jerome Powell’s testimony before a congressional committee on Tuesday. Powell was cautious, saying that the Fed planned to continue its current policy of gradual rate increases, despite the stimulus of government spending and recent tax reform. Powell sounded optimistic about economic conditions, noting that the US economy was benefiting from the global recovery as well as changes in fiscal policy. Importantly, Powell did not address the question of an acceleration of rate hikes. Currently, the Fed has projected three rate hikes in 2018, with increases widely expected at the March and May meetings. However, with inflation moving higher and the economy continuing to perform well, many analysts expect the Fed to raise rates four or more times this year. Any hints at an increased pace of rate hikes could send the US dollar broadly higher.

The Bank of Canada is keeping a watchful eye on the Federal Reserve, as it will be pressed to match rate hikes with its southern neighbor, or risk having the Canadian currency head lower. Currently, the BoC is projecting two rate hikes in 2018, compared to three or perhaps four increases by the Fed. Strong growth has propelled the BoC to raise rates three times since July, but there are some factors weighing against a rate hike before May. First, fourth quarter expansion may be lower than the BoC’s forecast of 2.5%. As well, the future of NAFTA remains unclear, as negotiations between Canada, Mexico and the US have floundered. If the US decides to pull out of NAFTA, the repercussions on the economy could be significant, and the BoC will have to delay any plans to raise rates.

Fed’s Door Ajar for Four Fed hikes

USD/CAD Fundamentals

Wednesday (February 28)

• 8:30 Canadian RMPI. Estimate 1.8%
• 8:30 Canadian IPPI. Estimate 0.5%
• 8:30 US Preliminary GDP. Estimate 2.5%
• 8:30 US Preliminary GDP Index. Estimate 2.4%
• 9:45 US Chicago PMI. Estimate 64.2
• 10:00 US Pending Home Sales. Estimate 0.4%
• 10:30 US Crude Oil Inventories. Estimate 2.4M

Thursday (March 1)

• 8:30 Canadian Current Account. Estimate -17.8B
• 8:30 US Personal Spending. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 226K
• 10:00 US Fed Chair Powell Testifies
• 10:00 US ISM Manufacturing PMI. Estimate 58.7

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, February 28, 2018

USD/CAD, February 28 at 8:10 EST

Open: 1.2776 High: 1.2779 Low: 1.2762 Close: 1.2775

USD/CAD Technical

USD/CAD has been flat in the Asian and European sessions

• 1.2757 is a weak support line
• 1.2855 is the next resistance line
• Current range: 1.2757 to 1.2855

Further levels in both directions:

• Below: 1.2757, 1.2630, 1.2494 and 1.2351
• Above: 1.2855, 1.2920 and 1.3014

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged this week. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards USD/CAD breaking out and moving lower.

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.