USD/CAD - Canadian Dollar Under Pressure, Markets Eye Fed Minutes

| About: PowerShares DB (UUP)

By Kenny Fisher

The Canadian dollar has weakened and is back above the 1.32 line on Tuesday, after posting strong gains in the Monday session. Currently, USD/CAD is trading slightly above the 1.32 line. On the release front, Canada will publish Housing Starts, with the indicator expected to improve to 194 thousand. In the US, there are no major releases on the schedule.

On Wednesday, the Federal Reserve will release the minutes of its September policy meeting, in which it held rates at 0.25 percent. As well, FOMC members William Dudley and Esther George will speak at public engagements.

The markets had plenty of employment numbers to sift through on Friday, with key job releases from both sides of the border. In Canada, employment change soared, as the economy added 67.2 thousand jobs in September. This crushed the estimate of 8.5 thousand. Despite the strong gain, the unemployment rate remained unchanged at 7.0%, as more people entered the work force.

The Canadian dollar posted sharp gains after the employment releases, but the positive news proved to be short-lived. USD/CAD rebounded, briefly pushing across the 1.33 line for the first time since March.

The Federal Reserve will be back in the spotlight on Wednesday, with the release of the policy minutes of the September meeting. At the meeting, three of ten members voted in favor of an immediate rate hike, underscoring growing dissent with the Fed’s cautious monetary stance, which has resulted in zero rate hikes in 2016. The US economy is in good shape, with weak inflation levels being the main sore point.

The likelihood of a December rate hike has increased to 65 percent, despite a lukewarm payrolls report for September. As we approach the December policy meeting, key economic indicators will be closely monitored for their effect on a rate move, and unexpected readings could cause strong volatility in the currency markets.

USD/CAD Fundamentals

Tuesday (October 11)

  • 6:00 US NFIB Small Business Index. Estimate 95.2.
  • 8:30 Canadian Housing Starts. Estimate 194K.
  • 10:00 US Labor Market Conditions Index.

USD/CAD for Tuesday, October 11, 2016

USD/CAD October 11 at 5:35 GMT

Open: 1.3188 High: 1.3232 Low: 1.3167 Close: 1.3220

USD/CAD Technical

S1 S2 S1 R1 R2 R3
1.2992 1.3028 1.3120 1.3253 1.3371 1.3457
Click to enlarge
  • USD/CAD has shown limited movement in the Asian session but has posted considerable gains in European trade.
  • 1.3120 is providing strong support.
  • 1.3253 is a weak resistance line.

Further levels in both directions:

  • Below: 1.3120, 1.3028 and 1.2922
  • Above: 1.3253, 1.3371, 1.3457 and 1.3551
  • Current range: 1.3120 to 1.3253

OANDA’s Open Positions Ratio

USD/CAD ratio is showing movement towards short positions on Tuesday. Currently, long positions have a strong majority (57%), indicative of trader bias towards USD/CAD breaking out and moving higher.

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.