The Canadian dollar has posted losses in the Thursday session, erasing the gains seen on Wednesday. USD/CAD is trading at 1.2871, up 0.18% on the day. On the release front, Canada releases Ivey PMI, which is expected to improve to 60.2 points. In the US, the focus is on employment numbers, with the markets expecting mixed news. Wage growth is expected to edge lower to 0.2%, while nonfarm payrolls are forecast to rebound sharply, with an estimate of 190 thousand. We’ll also hear from four FOMC members during the day.
The Canadian economy is performing well, and the markets can expect additional rate hikes this year. That was the hawkish message from Bank of Canada Governor Stephen Poloz earlier this week. 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 includes 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.
As expected, the Federal Reserve maintained the benchmark rate at a target of 1.5% to 1.75% on Wednesday. The rate statement was significant, with policymakers noting that “overall inflation has moved closer to 2 percent”. This was more hawkish than the March statement, which said that inflation indicators “have continued to run below 2 percent”. With inflation moving closer to the Fed target of 2 percent, there is a stronger likelihood that the Fed will upgrade its rate projection from three to four hikes in 2018. The odds of a fourth rate hike this year stand at 50%. The Fed rate statement also noted that “market-based measures of inflation compensation remain low”, a reference to soft wage growth, which is at 2.7%, lower than the 3% rate that the Fed would like to see.
USD/CAD Fundamentals
Friday (May 4)
- 8:30 US Average Hourly Earnings. Estimate 0.2%
- 8:30 US Nonfarm Employment Change. Estimate 190K
- 8:30 US Unemployment Rate. Estimate 4.0%
- 10:00 Canadian Ivey PMI. Estimate 60.2
*All release times are DST
*Key events are in bold
USD/CAD for Friday, May 4, 2018
USD/CAD, May 4 at 7:50 DST
Open: 1.2845 High: 1.2880 Low: 1.2836 Close: 1.2871
USD/CAD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.2590 | 1.2687 | 1.2757 | 1.2850 | 1.2943 | 1.3015 |
USD/CAD edged lower in the Asian session. The pair posted slight losses in the European session but has recovered
- 1.2757 is providing support
- 1.2850 was tested earlier in resistance and is under pressure
- Current range: 1.2757 to 1.2850
Further levels in both directions:
- Below: 1.2757, 1.2687 and 1.2590
- Above: 1.2850, 1.2943, 1.3015 and 1.3125
OANDA’s Open Positions Ratio
USD/CAD ratio continues to show little movement this week. Currently, short positions have a majority (59%), indicative of slight trader bias towards USD/CAD continuing to move downwards.