USD/CAD – Canadian Dollar Subdued Ahead of BoC Rate Announcement

USD/CAD continues to trade sideways this week. In the Wednesday session, the pair is trading at 1.2444 up 0.08% on the day. On the release front, all eyes are on the Bank of Canada, which is expected to announce a rate hike. The BoC will also release its quarterly monetary report, and BoC Governor Stephen Poloz will host a press conference. In the US, there are major releases. On Thursday, there are a host of key indicators out of the US, led by Building Permits and unemployment claims.

Will he or won’t he? Most experts are predicting that Governor Stephen Poloz will raise rates by 25 basis points, from 1.00% to 1.25%. Even if the BoC raises rates, Poloz could turn the move into a ‘dovish hike’, if he emphasizes that future rates will be data-dependent. The BoC last raised rates in September, marking a third rate hike in 2017. The Canadian economy has looked strong of late, underscored by unexpectedly strong employment data. At the same time, Poloz has some concerns about the economy, particularly looming dark clouds over NAFTA. The free-trade agreement, crucial to the Canadian economy, is in trouble, as US President Trump has threatened to cancel the pact unless Mexico and Canada make major concessions to the US. If the agreement is terminated, the Canadian dollar would likely take a tumble.

The markets are keeping one eye on the Federal Reserve, which holds its next policy meeting on January 31. A rate hike is a virtual certainty, with CME Fed Watch pegging the odds of a quarter-point hike at 98.5%. Although this means that a rate hike has been priced in by the markets, the dollar could nevertheless gain ground after a hike, as a rate increase would signify an important vote of confidence in the economy by the Fed Reserve. If the US economy continues to expand at a clip of around 3 percent, there is a strong likelihood of another rate hike in the first half of 2018.

Is the Market Too Aggressive on a BoC slam-dunk rate hike?

Wednesday (January 17)

  • 9:15 US Capacity Utilization Rate. Estimate 77.3%
  • 9:15 US Industrial Production. Estimate 0.3%
  • 10:00 BoC Monetary Policy Report
  • 10:00 BoC Rate Statement
  • 10:00 BoC Overnight Rate. Estimate 1.25%
  • 10:00 US NAHB Housing Market Index. Estimate 73
  • 11:15 BoC Press Conference
  • 14:00 US Beige Book
  • 16:00 US TIC Long-Term Purchases. Estimate 50.1B
  • 16:30 US FOMC Loretta Mester Speaks

Thursday (January 18)

  • 8:30 US Building Permits. Estimate 1.29M
  • 8:30 US Housing Starts. Estimate 1.28M
  • 8:30 US Philly Fed Manufacturing Index. Estimate 24.9
  • 8:30 US Unemployment Claims. Estimate 250K

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, January 17, 2018

USD/CAD, January 17 at 7:50 EDT

Open: 1.2435 High: 1.2461 Low: 1.2411 Close: 1.2444

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2060 1.2190 1.2351 1.2494 1.2630 1.2757

In the Asian session, USD/CAD inched lower but reversed directions and posted small gains. In European trade, the pair has ticked lower

  • 1.2351 is providing support
  • 1.2494 is the next resistance line
  • Current range: 1.2351 to 1.2494

Further levels in both directions:

  • Below: 1.2351, 1.2190 and 1.2060
  • Above: 1.2494, 1.2630, 1.2757 and 1.2860

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session. Currently, long positions have a majority (58%), indicative of trader bias towards USD/CAD continuing to move 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.