The Canadian dollar has ticked lower in the Friday session. Currently, the pair is trading at 1.2500, up 0.10%. On the release front, there are a host of key events on both sides of the border. In the US, wage growth is expected to gain 0.3%, but the markets are braced for a slowdown in Nonfarm Payrolls, with an estimate of 190 thousand. We’ll also get a look at ISM Non-Manufacturing PMI, which is expected to edge up to 57.6 points. In Canada, Employment Change is expected to post a soft gain of 1.8 thousand, after a sparkling gain of 79.5 thousand in November. Canada will also release Ivey PMI and Trade Balance. Traders should be prepared for some movement from USD/CAD during Friday’s North American session.
The Canadian dollar climbed 2.5% in December, and continues to move higher early in the New Year. Much of the loonie’s climb can be attributed to the rise in oil, which has jumped 6.8% since mid-December. Geopolitical tensions have boosted oil prices, in particular tensions with North Korea and the recent civil unrest in Iran. There is pressure on the Bank of Canada to raise its benchmark rate of 1.0%, which is lagging behind the Federal Reserve rate of between 1.25-1.50%. With the Fed widely expected raise rates in January, the Canadian dollar could lose ground if the BoC fails to respond with a rate hike of its own on January 17. However, the BoC may hold back, as it concerns continue over US threats to dismantle the free trade agreement.
As expected, the Federal Reserve minutes from December were positive in tone. At that meeting, the Fed raised interest rates for a third time in 2017. Policymakers noted in the minutes that economic activity was expanding at a “solid pace”, buoyed by improved consumer and business spending, as well as a stronger global economy. FOMC members revised upwards their projection for GDP in 2018, from 2.1% to 2.5%. The minutes noted that new tax reform is expected to raise economic growth, but the Fed is unsure on the impact of the new law in areas such as the labor market. As for inflation, Fed officials remain concerned that inflation levels are well below the target of 2%, and this trend could continue.
Friday (January 5)
- 8:30 Canadian Employment Change. Estimate 1.8K
- 8:30 Canadian Trade Balance. Estimate -1.2B
- 8:30 Canadian Unemployment Rate. Estimate 6.0%
- 8:30 US Average Hourly Earnings. Estimate 0.3%
- 8:30 US Nonfarm Employment Change. Estimate 190K
- 8:30 US Unemployment Rate. Estimate 4.1%
- 8:30 US Trade Balance. Estimate -49.7B
- 10:00 US ISM Non-Manufacturing PMI. Estimate 57.6
- 10:00 US Factory Orders. Estimate 1.1%
- 12:30 US FOMC Member Loretta Mester Speaks
*All release times are GMT
*Key events are in bold
USD/CAD for Friday, January 5, 2018
USD/CAD, January 5 at 7:35 EDT
Open: 1.2488 High: 1.2513 Low: 1.2483 Close: 1.2500
USD/CAD showed little movement in the Asian session and has ticked higher in European trade
- 1.2494 remains fluid and is currently a weak support line
- 1.2630 is the next resistance line
- Current range: 1.2494 to 1.2630
Further levels in both directions:
- Below: 1.2494, 1.2351 and 1.2190
- Above: 1.2630, 1.2757, 1.2860 and 1.3015
OANDA’s Open Positions Ratio
USD/CAD ratio is almost unchanged in the Friday session. Currently, long positions have a majority (60%), indicative of trader bias towards USD/CAD continuing to move higher.