USD/CAD – Canadian Dollar Rally Continues, US Consumer Inflation Next

The Canadian dollar has posted strong gains this week, gaining 1.2 percent. In the Wednesday session, USD/CAD has risen 0.14% on the day. In economic news, there are no Canadian events on the schedule. It’s a busy day in the US, with the release of the FOMC minutes and consumer inflation indicators. CPI is expected to dip to 0.0%, and Core CPI is forecast to remain at 0.2%. As well, the FOMC releases the minutes of its March rate meeting. On Thursday, the US publishes unemployment claims.

The Canadian dollar has flexed some muscle, but some serious headwinds could be around the corner. Syrian forces allegedly used chemical weapons against rebel positions last week, and a UN Security Council meeting ended inconclusively after Russia cast a veto on a US proposal to prove the attack. US President Trump has warned that a US response is on the way, and Russia has countered that it will respond to any US move. If Trump makes good on his promise, investor risk appetite could sink and drag down minor currencies such as the Canadian dollar.

The Bank of Canada Business Outlook Survey was released earlier this week. The survey pointed to a generally upbeat business sector and has helped boost the Canadian dollar. The survey found widespread intention by companies to increase investment and hiring, and “forward-looking sales indicators remain positive across most regions and sectors”. Still, the report is unlikely to change the current sentiment that the BoC will not raise rates at next week’s policy meeting.

The tariff spat between the US and China appears far from over, but both sides have lowered the flames which has roiled the markets in recent weeks. Investors are breathing a sigh of relief after Chinese President Xi Jimping sent out a conciliatory message on Tuesday. Xi was speaking at a development conference in China, and promised to lower tariffs on vehicle imports into China. This has been a major sticking point between the US and China, with President Trump complaining that China has a 25% tariff on US vehicle imports, yet the US only charges 2.5% on Chinese vehicles. Xi added that China was looking to solve issues through dialogue rather than confrontation, and the markets are hoping that the US and China can avert a trade war, which could drag down the global economy.

Xi is music to the markets ears

Syria Risks Offset Trade Truce

USD/CAD Fundamentals

Wednesday (April 11)

  • 8:30 US CPI. Estimate 0.0%
  • 8:30 US Core CPI. Estimate 0.2%
  • 10:30 US Crude Oil Inventories. Estimate -0.6M
  • 13:01 US 10-year Bond Auction
  • 14:00 US FOMC Meeting Minutes
  • 14:00 US Federal Budget Balance. Estimate -191B

 Thursday (April 12)

  • 8:30 US Unemployment Claims. Estimate 231K
  • 8:30 Canadian NHPI. Estimate 0.1%

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, April 11, 2018

USD/CAD, April 11 at 7:35 EST

Open: 1.2600 High: 1.2620 Low: 1.2591 Close: 1.2619

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2397 1.2496 1.2590 1.2687 1.2757 1.2850

USD/CAD inched lower in the Asian session and has posted slight losses in European trade

  • 1.2590 is under pressure in support
  • 1.2687 is the next resistance line
  • Current range: 1.2590 to 1.2687

Further levels in both directions:

  • Below: 1.2590, 1.2496 and 1.2397
  • Above: 1.2687, 1.2757, 1.2850 and 1.2930

OANDA’s Open Positions Ratio

USD/CAD ratio continues to show movement towards long positions. Currently, long positions have a majority (56%), indicative of 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.