USD/CAD – Canadian dollar higher, investors eye U.S jobless claims

USD/CAD is down slightly in the Thursday session. Currently, the pair is trading at 1.3470, down 0.07% on the day. On the release front, Canadian Wholesale Sales are expected to post a gain of 0.4% after two straight declines. Canada will also release ADP nonfarm payrolls, which declined by 23.0 thousand last week. In the U.S., the Philly Fed Manufacturing Index is expected to rise to 15.1, while jobless claims are forecast to increase to 216 thousand. On Friday, there are key events on both sides of the border. Canada releases GDP and retail sales, while the U.S. will publish Final GDP, durable goods orders and consumer confidence.

The Federal Reserve delivered the goods as far as a rate hike, marking the fourth rate hike of the year. The benchmark rate is currently in a range between 2.25 and 250 percent. However, the U.S dollar is broadly lower on Thursday, as the markets had expected a more dovish message in the rate statement. There was speculation that the Fed would “compensate” investors with a very dovish statement, given that the markets have been in turmoil for weeks and the U.S. economy appears to be cooling down. However, the Fed seems bent on continuing to raise rates in 2019 – most significantly, policymakers did not remove the critical phrase “further gradual increases” from their statement. At the same time, the dot plot forecast was lowered for 2019, from three rate rises to two. This marks a U-turn for the Fed, as back in October, Fed Chair Jerome Powell talked about continuing to raise rates until the “neutral rate” range was met. This range has been somewhat unclear, allowing Powell to say on Thursday that the “lower end” of the range has been achieved.

Just a few months ago, the markets were predicting a “rate hike every quarter” for 2019, but such heady talk has disappeared, as Fed policymakers have responded to economic data which is pointing to slower growth. The policy of gradual rate hikes bears much of the responsibility for the volatility in the equity markets, and the message from the Fed that more hikes are coming will likely mean that the volatility will continue in December and into the New Year. This will likely translate into volatility for the Canadian currency, which is sensitive to the level of risk appetite on the part of investors.

A not so dovish hike by the Fed

All about the FED and the discussions go on.

USD/CAD Fundamentals

Thursday (December 20)

• 8:30 Canadian ADP Nonfarm Employment Change
• 8:30 Canadian Wholesale Sales. Estimate 0.4%
• 8:30 US Philly Fed Manufacturing Index. Estimate 15.1
• 8:30 US Unemployment Claims. Estimate 216K
• 10:00 US CB Leading Index. Estimate 0.0%
• 10:30 US Natural Gas Storage. Estimate -136B

Friday (December 21)

• 8:30 Canadian Core Retail Sales. Estimate 0.2%
• 8:30 Canadian Retail Sales. Estimate 0.4%
• 8:30 Canadian GDP. Estimate 0.2%
• 8:30 US Core Durable Goods Orders. Estimate 0.3%
• 8:30 US Final GDP. Estimate 3.5%
• 8:30 Durable Goods Orders. Estimate 1.6%
• 10:00 US Core PCE Price Index. Estimate 0.2%
• 10:00 US Personal Spending. Estimate 0.3%
• 10:00 US Revised UoM Consumer  Sentiment. Estimate 97.6

*All release times are EST

*Key events are in bold

USD/CAD for Thursday, December 20, 2018

USD/CAD, December 20 at 7:45 EST

Open: 1.3480 High: 1.3505 Low: 1.3447 Close: 1.3470

USD/CAD Technical

In the Asian session, USD/CAD ticked lower but then recovered. The pair is down slightly in European trade

• 1.3383 was tested in support earlier. It is a weak line
• 1.3552 is the next resistance line
• Current range: 1.3461 to 1.3552

Further levels in both directions:

• Below: 1.3461, 1.3383, 1.3292 and 1.3198
• Above: 1.3552, 1.3696 and 1.3793

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