USD/CAD – Canadian Dollar Rally Continues on NAFTA Optimism

The Canadian dollar continues to gain ground, and has inched higher in the Thursday session. Currently, USD/CAD is trading at 1.2891, down 0.10% on the day. On the release front, there are no Canadian data releases. In the US, unemployment claims rose to 229 thousand, higher than the forecast of 225 thousand. On Friday, the US releases durable goods and housing reports.

It’s been a good week for the Canadian dollar, which has gained 1.6 percent against the greenback. This has erased most of last week’s losses. There has been some good news on the NAFTA front, as the US appears to have softened its rigid negotiation position. The US had demanded far-reaching concessions from Canada and Mexico, threatening to withdraw from NAFTA if its demands were not met. NAFTA is critically important for the Canadian economy, and the specter of the free-trade agreement being cancelled has weighed on the Canadian dollar for months. However, there was good news this week as US has dropped its demand that vehicles produced in Canada or Mexico that are destined to the US, contain a minimum of 50% US content. This demand was one of the key sticking points in the negotiations, and its removal should speed up talks on the renegotiated NAFTA agreement. Another scare for Canadian policymakers was the US decision to slap tariffs on steel and aluminum products, as Canada is the largest exporter of steel to the US. Canada avoided a bullet as President Trump announced that the Canada and Mexico would be exempt from the tariffs, at least temporarily.

As widely expected, the Federal Reserve raised rates by a quarter-point on Wednesday, bringing the benchmark rate to a range between 1.50% and 1.75%. The markets were looking for any clues with regard to the pace of rate hikes in 2018 – currently the Fed is projecting three hikes, but a robust US economy could push the Fed to press the rate trigger four times. The rate statement did not directly address the issue, but there was a refreshing lack of Fedspeak from policymakers, who said that “the economic outlook has strengthened in recent months”. This phrase has not been used in previous rate statements, and if Fed policymakers reiterate positive sentiment towards the economy, could push the US dollar to higher ground.

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USD/CAD Fundamentals

Thursday (March 22)

  • 8:30 US Unemployment Claims. Estimate 225K. Actual 229K
  • 9:00 US HPI. Estimate 0.4%
  • 9:45 US Flash Manufacturing PMI. Estimate 55.4
  • 9:45 US Flash Services PMI. Estimate 55.9
  • 10:00 US CB Leading Index. Estimate 0.5%
  • 10:30 US Natural Gas Storage. Estimate -88B
  • 14:45 BOC Senior Deputy Governor Carolyn Wilkins Speaks

Friday (March 23)

  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Durable Goods Orders. Estimate 1.6%
  • 10:00 US New Home Sales.  Estimate 621K

*All release times are GMT

*Key events are in bold

USD/CAD for Thursday, March 22, 2018

USD/CAD, March 22 at 8:50 EST

Open: 1.2880 High: 1.2899 Low: 1.2878 Close: 1.2891

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2687 1.2757 1.2850 1.2930 1.3050 1.3165

USD/CAD edged higher in the Asian session but has given up most of these gains in the European session

  • 1.2850 is providing support
  • 1.2930 is the next line in resistance
  • Current range: 1.2850 to 1.2930

Further levels in both directions:

  • Below: 1.2850, 1.2757 and 1.2687
  • Above: 1.2930, 1.3050, 1.3165 and 1.3260

OANDA’s Open Positions Ratio

USD/CAD ratio is showing strong gains towards long positions, consistent with sharp losses by USD/CAD. Currently, short positions have a majority (57%), indicative of 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.

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.