Canadian Dollar Unchanged, Markets Eye Durable Goods, Jobless Claims

USD/CAD is almost unchanged on Wednesday, as the pair trades at 1.3360. On the release front, today’s highlight is New Home Sales. The indicator is expected to drop to 601 thousand. There are no Canadian releases for the remainder of the week. On Thursday, the US will release Core Durable Goods Orders and Unemployment Claims.

The Canadian dollar continues to trade above the 1.33 line, as the currency finds itself at 7-month lows against its US counterpart. USD/CAD jumped late last week, after the Bank of Canada’s rate decision to maintain its benchmark rate at 0.50%, where it has been pegged since July 2015.

The BoC downgraded its forecasts for economic growth, projecting GDP to grow 1.1 percent in 2016, down from its forecast of 1.3 percent in July. For 2017, growth is expected at 2.0 percent, down from 2.2 percent in July. The bank stated that the lower forecasts were a result of weaker housing demand and lower export forecasts. On Monday, the Canadian government and the BoC renewed the inflation target of 2 percent until 2021.

With market anticipation of a US rate hike growing, the odds of a rate hike in December continue to rise. The CME Fed Watch has priced in a December rate hike at 72%. The prospect of a US rate hike for the first time in over a year has bolstered the US dollar against its rivals, including the Japanese yen. The US economy remains strong, buoyed by a labor market that is close to capacity, with unemployment at a healthy 5.0%.

Inflation levels remain low and are unlikely to show much improvement in the next few months. Although the Fed would prefer stronger inflation levels, other economic indicators remain strong enough such that the lack of inflation is unlikely to be the critical factor in the Fed rate decision. The Fed will also hold a policy meeting in early November, but it’s unlikely to make any rate moves just before the US presidential election.

USD/CAD Fundamentals

Wednesday (October 26)

  • 8:30 US Goods Trade Balance. Estimate -60.6B. Actual -56.1B
  • 8:30 US Preliminary Wholesale Inventories. Estimate 0.1%. Actual 0.2%
  • 9:45 US Flash Services PMI. Estimate 52.4. Actual
  • 10:00 US New Home Sales. Estimate 601K
  • 10:30 US Crude Oil Inventories. Estimate 0.7M

Upcoming Key Events

Thursday (October 27)

  • 8:30 US Core Durable Goods Orders. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 261K

*All release times are EDT

*Key events are in bold

USD/CAD for Wednesday, October 26, 2016


USD/CAD October 26 at 9:15 GMT

Open: 1.3352 High: 1.3380 Low: 1.3330 Close: 1.3360

USD/CAD Technical

  • USD/CAD has shown very limited movement in the Wednesday session
  • 1.3253 is providing strong support
  • 1.3371 was tested earlier in resistance and remains a weak line

Further levels in both directions:

  • Below: 1.3253, 1.3120, 1.3028 and 1.2922
  • Above: 1.3371, 1.3457 and 1.3587
  • Current range: 1.3371 to 1.3457

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session, consistent with the lack of movement from USD/CAD. Currently, short positions command a strong majority (67%), indicative of trader bias towards USD/CAD breaking out and moving to lower ground.

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