USD/CAD – Canadian Dollar Dips as Investors Search for Cues

The Canadian dollar has posted slight gains in the Monday session, after trading sideways on Friday. USD/CAD is trading at 1.2878, up 0.24% on the day. It’s a light day on the release front, with no major releases in the US or Canada. On Tuesday, Canada releases Housing Starts and the US publishes PPI and JOLTS Job Openings. We’ll also hear from Federal Reserve Chair Jerome Powell, who will speak at an event in Zurich.

Canadian indicators ended the week on a high note. Ivey PMI jumped to 71.5 points in April, crushing the estimate of 60.2 points. This economic index covers all sections of the Canadian economy, but the positive release failed to boost the Canadian dollar, as USD/CAD was unchanged on Friday. In the US,  job numbers were a mixed bag. Nonfarm payrolls rebounded with a gain of 164 thousand, although this fell short of the estimate of 190 thousand. Wage growth dropped from 0.3% to 0.1%, missing the estimate of 0.2 percent. There was some good news from the unemployment rate, which dropped to 3.9%, beating the estimate of 4.1%. The Fed will likely be pleased that nonfarm payrolls were not red hot, as they April report justifies its policy of gradual rate hikes.

The Canadian economy is in good shape and the markets can expect additional rate hikes this year. That was the hawkish message from Bank of Canada Governor Stephen Poloz at an event last week in Yellowknife. Poloz singled out household debt as a significant concern, but said that “since the economy is close to where it belongs, interest rates are headed higher”. The markets are confident that the BoC will press the rate trigger in July, with the odds of a hike currently at 73 percent. Other economic issues that Poloz said are weighing on the Canadian economy include uncertainty over US trade policy and the ongoing NAFTA negotiations. If there is progress to report on the US-China tariff spat or on NAFTA, the Canadian dollar should respond with gains.

All eyes will be on this week’s US CPI report

U.S Dollar Bulls Take Firm Control

USD/CAD Fundamentals

Monday (May 7)

• 4:o0 BOC Deputy Governor Timothy Lane Speaks
• 8:25 US FOMC Member Raphael Bostic Speaks
• 14:00 US FOMC Member Thomas Barkin Speaks
• Tentative – US Loan Officer Survey
• 15:00 US Consumer Credit. Estimate 16.2B

Tuesday (May 8)

• 3:15 Federal Reserve Chair Jerome Powell Speaks
• 8:15 Canadian Housing Starts. Estimate 218K
• 8:30 US PPI. Estimate 0.2%
• 8:30 US Core PPI. Estimate 0.2%
• 10:00 US JOLTS Job Openings. Estimate 6.02M

*All release times are DST

*Key events are in bold

USD/CAD for Monday, May 7, 2018

USD/CAD, May 7 at 7:45 DST

Open: 1.2846 High: 1.2878 Low: 1.2840 Close: 1.2878

USD/CAD Technical

USD/CAD showed little movement in the Asian session and has edged upwards in the European session.

• 1.2850 is a fluid line and has switched to a support role on Monday. It could see further action in the North American session
• 1.2943 is the next line of resistance
• Current range: 1.2850 to 1.2943

Further levels in both directions:

• Below: 1.2850, 1.2757, 1.2687 and 1.2590
• Above: 1.2943, 1.3015 and 1.3125

OANDA’s Open Positions Ratio

USD/CAD ratio is showing slight movement towards long positions. Currently, short positions have a majority (57%), indicative of trader bias towards USD/CAD reversing directions and moving downwards.

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