USD/CAD – Canadian Dollar Under Pressure as Global Stock Markets Slide

The Canadian dollar is steady in the Tuesday session, after considerable losses in the past two sessions. Currently, the pair is trading at 1.2556, up 0.16% on the day. On the release front, Canada’s trade deficit widened to C$2.3 billion, missing the estimate of C$2.3 billion. The US trade deficit also widened, climbing to $53.1 billion and missing the forecast of $52.1 billion. Later in the day, Canada releases Ivey PMI, which is forecast to improve to 60.7 points. In the US, the key event of the day is JOLTS Job Openings, which is expected to climb to 5.95 million. On Wednesday, Canada releases Building Permits.

The US dollar continues to post broad gains this week, and the Canadian dollar has declined 1.0% and is at its lowest level since mid-January. The greenback has pushed higher as global stock markets are in red territory. US stock markets started the week with strong losses, and the Dow Jones posted its biggest loss in one day on Monday, losing 1,500 points at one stage. The index ended the day down 4.6%, and the downward trend has continued in the Asian and European markets on Tuesday. As investors head for the hills, analysts are scrambling to find the reasons behind the massive sell-off in the stock markets. Some experts are pointing to the changing of the guard at the Federal Reserve, with Jerome Powell replacing outgoing chair Janet Yellen on Saturday. However, Powell is not expected to change current monetary policy, so it’s unclear how Powell would have rubbed the markets the wrong way after just one day at his new job.

A more likely explanation for the sell-off can be attributed to strong US nonfarm payrolls and wage growth reports, which were released on Friday. Investors fear that the sharp data could lead to higher inflation, which in turn would result in more rate hikes this year. Higher interest rates make the dollar more attractive for investors, at the expense of the stock markets. Adding to investors’ concerns, there are expectations that the ECB and possibly the Bank of Japan could raise rates late in 2018, which would push up the euro and yen and weigh on the stock markets.

USD/CAD Fundamentals

Tuesday (February 6)

  • 8:30 Canadian Trade Balance. Estimate -2.3B. Actual -3.2B
  • 8:30 US Trade Balance. Estimate -52.1B. Actual -53.1B
  • 10:00 Canadian Ivey PMI
  • 10:00 US JOLTS Jobs Openings. Estimate 5.95M
  • Tentative – US IBD/TIPP Economic Optimism. Estimate 55.4

Wednesday (February 7)

  • 8:30 Canadian Building Permits

*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, February 6, 2018

USD/CAD, February 6 at 8:00 EDT

Open: 1.2427 High: 1.2566 Low: 1.2398 Close: 1.2556

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2190 1.2351 1.2494 1.2630 1.2757 1.2855

USD/CAD showed little movement in the Asian session. In the European trade, the pair dropped lower but has recovered

  • 1.2494 is providing support
  • 1.2630 is the next resistance line
  • Current range: 1.2494 to 1.2630

Further levels in both directions:

  • Below: 1.2494, 1.2351, 1.2190 and 1.2060
  • Above: 1.2630, 1.2757 and 1.2855

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Tuesday session. Currently, long positions have a majority (58%), indicative of trader bias towards USD/CAD continuing to move to higher ground.

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.