USD/CAD continues to move sideways this week. In the Thursday session, the pair is trading at 1.2574, up 0.20% on the day. On the release front, Canada releases NHPI, a key housing inflation indicator, which is expected at 0.2%. In the US, PPI and Core PPI are expected to soften to 0.2%, and unemployment claims is forecast to drop to 246 thousand. On Friday, the US releases key consumer indicators for December, with the release of CPI and retail sales reports.
The Canadian dollar lost ground on Wednesday, following a report that China was considering slowing or halting the purchase of US government bonds. China boasts the largest currency reserves, estimated at $3 trillion. It is also the biggest holder of US government bonds, in the amount of $1.19 trillion. Why would China make this move? One reason is that it may consider US treasuries less attractive compared to other assets. As well, it could be part of China’s strategy to flex some muscle as a possible trade war looms between the US and China, which are the two largest economies in the world. The report has pushed US Treasury yields higher and sent the US dollar downwards.
The Canadian dollar has held its own against the greenback in January, aided by two important factors. First, the economy has posted excellent employment numbers. In December, the economy added 78.6 thousand jobs, defying experts who predicted a minuscule gain of 1.8 thousand. This release comes on the heels of a superb November release, when the economy added 79.5 thousand news jobs. The unemployment rate dropped to 5.7% in December, down from 5.9% a month earlier. Second, the recent rise in oil prices, which are up 6.8% since mid-December, has boosted the commodity-based Canadian currency. The BoC is expected to raise rates later this month, which could send the Canadian dollar upwards.
Thursday (January 11)
- 8:30 Canadian NHPI. Estimate 0.2%
- 8:30 US PPI. Estimate 0.2%
- 8:30 US Core PPI. Estimate 0.2%
- 8:30 US Unemployment Claims. Estimate 246K
- Tentative – IBD/TIPP Economic Optimism. Estimate 52.3
- 10:30 US Natural Gas Storage. Estimate -318B
- 13:01 US 30-year Bond Auction
- 14:00 US Federal Budget Balance. Estimate -34.5B
- 15:30 US FOMC Member William Dudley Speaks
Friday (January 12)
- 8:30 US CPI. Estimate 0.1%
- 8:30 US Core CPI. Estimate 0.2%
- 8:30 US Core Retail Sales. Estimate 0.4%
- 8:30 US Retail Sales. Estimate 0.5%
- 10:00 US Business Inventories. Estimate 0.3%
*All release times are GMT
*Key events are in bold
USD/CAD for Thursday, January 11, 2018
USD/CAD, January 11 at 8:00 EDT
Open: 1.2548 High: 1.2590 Low: 1.2528 Close: 1.2574
USD/CAD was flat in the Asian session and has edged higher in European trade
- 1.2494 is providing support
- 1.2630 is the next resistance line
- Current range: 1.2351 to 1.2494
Further levels in both directions:
- Below: 1.2494, 1.2351, 1.2190 and 1.2060
- Above: 1.2630, 1.2757 and 1.2860
OANDA’s Open Positions Ratio
USD/CAD ratio continues to show little movement this week. Currently, long positions have a majority (61%), indicative of trader bias towards USD/CAD reversing directions and moving to higher ground.