USD/CAD – Canadian dollar edges lower, trade deficit widens

The Canadian dollar has edged higher in Wednesday trade. Currently, the pair is trading at 1.3415, up 0.25%. On the release front, Canada posted a larger trade deficit than expected. The deficit increased to C$4.2 billion, higher than the forecast of C$3.5 billion. There are no major U.S. events on the calendar. On Thursday, the U.S. releases Final GDP and unemployment claims.

Canadian bonds showed an inverted yield curve on Monday, after U.S. Treasuries showed the same pattern on Friday. This has spooked investors, as the inverted yield curve is a sign of a recession. The Bank of Canada is already in a dovish stance and could follow the Fed and freeze rates for the rest of the year. If the economic slowdown continues, policymakers may have to consider a rate cut in order to stimulate the economy.

After a sharply dovish Fed meeting last week, risk apprehension has risen considerably. This could mean headwinds for the Canadian dollar, a minor currency. The Fed said that it had no plans to raise rates before 2019, and also lowered its growth forecast for 2019 to 2.1%, down from 2.3% in December. On Friday, the spread between 3-month and 10-year Treasury notes turned negative, signifying an inverted yield curve. All eyes will be on U.S. Final GDP, which will be released on Thursday. If GDP misses the forecast of 2.4%, investors could get jittery and dump Canadian dollars in favor of safe-haven assets.

Lest we quickly forget

Today’s U.K Parliament Brexit Agenda

USD/CAD Fundamentals

Wednesday (March 27)

• 8:30 Canadian Trade Balance. Estimate -3.5B. Actual 4.2B
  
• 8:30 US Trade Balance. Estimate -57.2B. Actual -51.1B
  
• Tentative – US Current Account. Estimate -130B
• 10:30 US Crude Oil Inventories. Estimate -1.1M
• 17:30 US FOMC Member George Speaks

Thursday (March 28)

• 8:30 US Final GDP. Estimate 2.4%
• 8:30 US Unemployment Claims. Estimate 222K

*All release times are DST

*Key events are in bold

USD/CAD for Wednesday, March 27, 2019

USD/CAD, March 27 at 8:40 EST

Open: 1.3381 High: 1.3415 Low: 1.3377 Close: 1.3415

USD/CAD Technical

USD/CAD ticked higher in the Asian session. In European trade, the pair posted small losses but then recovered. The pair continues to post gains early in North American trade

• 1.3383 is a weak support level
• 1.3445 is the resistance line
• Current range: 1.3383 to 1.3445

Further levels in both directions:

• Below: 1.3383, 1.3290, 1.3200 and 1.3125
• Above: 1.3445, 1.3552 and 1.3662

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