USD/CAD – Canadian dollar slide continues as risk apprehension grows

The downward spiral continues this week, as the Canadian dollar has lost more ground in the Thursday session. Currently, USD/CAD is trading at 1.3417, up 0.46% on the day. Earlier in the day, USD/CAD broke above the 1.34 level for the first time since June 2017.

In economic news, In the U.S, the spotlight will be on employment releases. ADP nonfarm payrolls is expected to drop to 195 thousand, down from 227 thousand a month earlier. The strength of the ADP release could provide a clue regarding the official NFP report on Friday, which is also expected to drop sharply. Unemployment claims spiked last week at 234 thousand, but are forecast to drop to 224 thousand. Later, the ISM Non-Manufacturing PMI is expected to dip to 59.1 points. In Canada, the trade deficit is expected to widen to C$0.7 billion. Elsewhere, OPEC members are meeting in Vienna for a second straight day. On Friday, Canada and the U.S. release key employment indicators, highlighted by U.S. nonfarm payrolls.

As expected, the Bank of Canada stayed on the sidelines and left the benchmark rate at 1.75%. There were a number of factors in favor of the bank staying on the sidelines. The escalating trade war between the U.S. and China has hurt the Canadian export sector, and oil prices have dropped in recent weeks. Domestically, GDP declined 0.2% in September, the first drop since January. As well, the Federal Reserve has hinted that it will reduce the number of rate hikes in 2019, which has eased pressure on the BoC to raise rates.

It’s been a dismal week for the Canadian dollar, which is down 1.0%. The downward spiral has mirrored movement in the global stock markets. Equities started the week with gains, but this proved to be short-lived, as investor optimism following the Trump-Xi meeting quickly dissipated. At the start of the week, the Canadian dollar jumped after President Trump and Chinese President Xi reached an agreement, whereby the U.S. agreed to suspend further tariffs until March 1. However, investors have sobered since, wondering if the 90-day truce is simply a pause in the trade war between the world’s two largest economies. the two super-economies remain far apart on a number of issues, including U.S. accusations that China has been stealing U.S. intellectual property. All indications are that reaching a deal will be difficult. The markets have been sensitive to development in the tariff tussle between the countries, and the likely ups-and-downs in the upcoming negotiations will likely affect market movement in the coming weeks.

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USD/CAD Fundamentals

Thursday (December 6)

• All Day – OPEC Meetings
• 7:30 US Challenger Job Cuts
• 8:15 US ADP Nonfarm Employment Change. Estimate 196K
• 8:30 US Revised Nonfarm Productivity. Estimate 2.3%
• 8:30 US Revised Unit Labor Costs. Estimate 1.1%
• 8:30 US Trade Balance. Estimate -55.2B
• 8:30 US Unemployment Claims. Estimate 226K
• 8:30 Canadian Trade Balance. Estimate -0.7B
• 8:35 BoC Governor Poloz Speaks
• 9:45 US Final Services PMI. Estimate 54.4
• 10:00 US Factory Orders. Estimate -1.9%
• 10:00 Canadian Ivey PMI. Estimate 60.3
• 10:00 US ISM Non-Manufacturing PMI. Estimate 59.2
• 11:00 US Crude Oil Inventories. Estimate -1.3M
• 12:15 US FOMC Member Bostic Speaks
• 18:30 US FOMC Member Williams Speaks
• 18:45 US Federal Reserve Chair Powell Speaks

Friday (December 7)

• 8:30 Canadian Employment Change. Estimate 10.3K
• 8:30 Canadian Unemployment Rate. Estimate 5.8%
• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 200K
• 8:30 US Unemployment Rate. Estimate 3.7%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.1

*All release times are DST

*Key events are in bold

USD/CAD for Thursday, December 6, 2018

USD/CAD, December 6 at 8:10 EST

Open: 1.3356 High: 1.3445 Low: 1.3354 Close: 1.3417

USD/CAD Technical

USD/CAD continues to break through resistance levels. In the Asian session, the pair ticked lower but then rebounded and moved higher. The pair has posted slight gains in the European session

• 1.3382 has switched to a support role after gains by USD/CAD on Thursday
• 1.3461 is the next resistance line
• Current range: 1.3382 to 1.3461

Further levels in both directions:

• Below: 1.3382, 1.3292, 1.3198 and 1.3099
• Above: 1.3461, 1.3552 and 1.3696

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