USD/CAD – Sharp Canadian Retail Sales Sends Loonie to 2-Week High

The Canadian dollar continues to improve, and has posted slight gains in Friday trade. Currently, USD/CAD is trading at 1.2720, down 0.14% on the day. On the release front, it’s a busy day on both sides of the border. Canada releases its monthly GDP report, which is expected to remain unchanged at 0.2%. In the US, there are three key events – Durable goods reports are expected to improve, but the markets are braced for softer readings from New Home Sales and UoM Consumer Sentiment.

The Canadian currency is on track for its strongest weekly gains since September, after jumping 0.75% against the US dollar on Thursday. Canadian consumer numbers boosted the loonie, and pushed it to its highest level since December 12. Retail Sales sparkled with a gain of 0.8% in October, well above the forecast of 0.4%. This was the indicator’s highest gain since April. As well, CPI improved to 0.3%, a five-month high. This edged above the estimate of 0.2%. If GDP follows suit and also beats the  forecast, the Canadian dollar rally could continue.

Christmas has come early for President Trump, as he celebrated with Republican lawmakers the new tax reform bill. Earlier in the week, both branches of Congress passed the legislation, although the votes were tight, as all Democrats voted against the bill. It’s a major victory for Trump, as one of his key campaign pledges was tax reform, and the new legislation marks the first overhaul of the tax code since the Reagan administration.

The US economy received an excellent report card on Thursday, as Final GDP posted a strong gain of 3.2%, just shy of the Preliminary GDP reading of 3.3%. With the US economy posting growth above 3% for another quarter, the Federal Reserve remains on track for another rate hike in January. The CME Group has pegged the odds of a January hike at 98%, and if the economy continues its current pace, the Fed could raise rates up to four times in 2018. Inflation remains a sore point, as the Fed target of 2.0% remains well out of reach. Fed Chair Janet Yellen and other FOMC members have said they expect that the strong labor market will lead to higher inflation, but the Fed has demonstrated that it is willing to press ahead with rate hikes despite low inflation.

USD/CAD Fundamentals 

Friday (December 22)

• 8:30 Canadian GDP. Estimate 0.2%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate 2.1%
• 8:30 US Personal Spending. Estimate 0.5%
• 10:00 US New Home Sales. Estimate 654K
• 10:00  UoM Consumer Sentiment. Estimate 97.1

*All release times are GMT

*Key events are in bold

USD/CAD for Friday, December 22, 2017

USD/CAD, December 22 at 8:10 EDT

Open: 1.2738 High: 1.2750 Low: 1.2700 Close: 1.2720

USD/CAD Technical

USD/CAD was flat in the Asian session and posted small losses in European trade

• 1.2630 is providing support
• 1.2757 switched to a resistance role following strong losses by USD/CAD on Thursday
• Current range: 1.2630 to 1.2757

Further levels in both directions:

• Below: 1.2630, 1.2494 and 1.2351
• Above: 1.2757, 1.2860, 1.3015 and 1.3161

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in the Friday session. Currently, short positions have a majority (52%), indicative of slight trader bias towards USD/CAD continuing to move 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.