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USD/CAD: Canadian Dollar Edges Higher On Soft US Inflation Reports

By Kenny FisherForexSep 13, 2017 09:09AM ET
www.investing.com/analysis/usdcad--canadian-dollar-edges-higher-on-soft-us-inflation-reports-200213017
USD/CAD: Canadian Dollar Edges Higher On Soft US Inflation Reports
By Kenny Fisher   |  Sep 13, 2017 09:09AM ET
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The Canadian dollar has posted slight losses in the Wednesday session. Early in the North American session, USD/CAD is trading at 1.2150, down 0.40% on the day.

On the release front, US inflation numbers improved in August, but fell short of the estimates. PPI improved to 0.2%, shy of the estimate of 0.3%. As well, Core CPI gained 0.1%, short of the forecast of 0.2%. The focus on inflation will continue on Thursday on both sides of the border. Canada releases NHPI, while the US publishes PPI and Unemployment Claims.

The US economy has been performing well in the second quarter. Preliminary GDP came in at a sizzling 3.0%, and the labor market remains close to capacity. Still, the Achilles heel of the economy remains stubbornly low inflation levels. Wage pressure has been limited, despite the fact that many businesses cannot fill job openings.

Weak inflation has hampered the Fed’s plans to raise interest rates a third time this year, and the odds of a December hike have dipped to just 31%, as the markets are increasingly doubtful that the Fed will make a move before next year. Will we see stronger numbers from CPI? Both CPI and Core CPI are expected to improve in the September readings, with estimates of 0.2% and 0.3%, respectively.

The Canadian dollar has enjoyed an impressive run, as the currency has jumped 2.7% against the greenback in September. Oil prices have remained close to $50, and stronger economic growth led the BoC to raise the benchmark rate by 25 basis points last week, from 0.75% to 1.00%. The rate hike caught the markets by surprise, and sent USD/CAD down to a 2-year low. However, Canada is heavily reliant on its export sector, and the downside of a strong Canadian dollar is that it makes the country’s exports more expensive. Still, Canadian finance minister Bill Morneau said he had no problem with a higher Canadian dollar, which reflected a strong economy.

USD/CAD Fundamentals

Wednesday (September 13)

  • 8:30 US PPI. Estimate 0.3%. Actual 0.2%
  • 8:30 US Core PPI. Estimate 0.3%. Actual 0.1%
  • 10:30 US Crude Oil Inventories. Estimate 4.1M
  • 13:01 US 10-y Bond Auction
  • 14:00 US Federal Budget Balance. Estimate -118.6B

Upcoming Key Events

Thursday (September 14)

  • 8:30 Canadian NHPI. Estimate 0.3%
  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Unemployment Claims. Estimate 303K

*All release times are GMT

*Key events are in bold

USD/CAD for Wednesday, September 13, 2017

USD/CAD Sep 12-14 Chart
USD/CAD Sep 12-14 Chart

USD/CAD Wednesday, September 13 at 8:40 EDT

Open: 1.2186 High: 1.2186 Low: 1.2134 Close: 1.2140

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.1825 1.1949 1.2126 1.2218 1.2302 1.2459

USD/CAD has edged lower in the Asian and European sessions

  • 1.2126 is a weak support line
  • 1.2218 is the next resistance line
  • Current range: 1.2126 to 1.2218

Further levels in both directions:

  • Below: 1.2126, 1.1949, 1.1825, and 1.1673
  • Above: 1.2218, 1.2302 and 1.2459

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in the Wednesday session. Currently, long positions have a strong majority (65%), indicative of trader bias towards USD/CAD reversing directions and moving downwards.

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USD/CAD: Canadian Dollar Edges Higher On Soft US Inflation Reports
 

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USD/CAD: Canadian Dollar Edges Higher On Soft US Inflation Reports

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