USD/CAD – Canadian Dollar Dips, Markets Eye Bank of Canada

USD/CAD has posted gains in Wednesday session, erasing much of the losses seen on Tuesday. Currently, USD/CAD is trading at 1.2927, up 0.40% on the day. On the release front, today’s key event is ADP nonfarm payrolls, which is expected to drop sharply to 199 thousand. In Canada, the trade deficit is expected to narrow to C$2.5 billion. As well, the Bank of Canada will set the benchmark rate, which is expected to remain pegged at 1.25%.

The Federal Reserve is widely expected to raise rate four times in 2018, but the Bank of Canada will likely be unable to compete with that kind of pace. The BoC is concerned with economic growth, which slowed in the fourth quarter, as well as uncertainty over NAFTA, which could fall apart if the Trump administration makes good on its threat to withdraw if its demands for more favorable treatment for US goods is not met. The Bank is not expected to raise rates before May, and if the Fed outpaces the BoC on the rate front, the Canadian dollar could lose ground to a more attractive US currency.

The Canadian government is seeing red after President Trump has threatened to impose stiff tariffs on Canadian steel imports. Canada is the top exporter of steel to the US, accounting for some 16% of US steel imports. The “tariff tussle” could prove to be a major irritant in US-Canada relations, and has weakened the Canadian dollar, as USD/CAD broke above the 1.30 line on Monday, for the first time since late June. Trump is facing strong opposition to the move from Republican lawmakers, and has held out a carrot to Mexico and Canada – if a new NAFTA deal is reached, both countries would be exempted from the tariffs. Canada’s steel industry is a crucial backbone of the economy, and if the US does slap on the tariffs, it could ignite a trade war with Canada and other US trading partners.

Canada and Mexico Dismiss Trump Tariff Exemption Offer

USD/CAD Fundamentals

Wednesday (March 7)

  • 8:00 US FOMC Member Raphael Bostic Speaks
  • 8:15 US ADP Nonfarm Employment Change. Estimate 199K
  • 8:20 US FOMC Member William Dudley Speaks
  • 8:30 US Revised Nonfarm Productivity. Estimate -0.1%
  • 8:30 US Revised Unit Labor Costs. Estimate 2.1%
  • 8:30 US Trade Balance. Estimate -55.1B
  • 8:30 Canadian Trade Balance. Estimate -2.5B
  • 10:00 BoC Rate Statement
  • 10:00 BoC Overnight Rate. Estimate 1.25%
  • 10:30 US Crude Oil Inventories. Estimate 2.6M
  • 14:00 US Beige Book
  • 15:00 US Consumer Credit. Estimate 17.5B

Thursday (March 8)

  • 8:30 US Unemployment Claims. Estimate 220K

*All release times are GMT

*Key events are in bold

USD/CAD for Wedesday, March 7, 2018

USD/CAD, March 7 at 8:00 EST

Open: 1.2876 High: 1.2961 Low: 1.2876 Close: 1.2927

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2757 1.2865 1.2920 1.3014 1.3165 1.3270

USD/CAD posted gains in the Asian session and is flat in European trade

  • 1.2920 has switched to a support role as USD/CAD has posted gains on Wednesday
  • 1.3014 is the next resistance line
  • Current range: 1.2920 to 1.3014

Further levels in both directions:

  • Below: 1.2920, 1.2865, 1.2757 and 1.2630
  • Above: 1.3014, 1.3165 and 1.3270

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session. Currently, short positions have a majority (61%), indicative of trader bias towards USD/CAD reversing directions 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.

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.