The Canadian dollar continues to have an uneventful week. In the Wednesday session, USD/CAD is trading at 1.3316, up 0.10% on the day. On the release front, the sole Canadian event is a speech from BoC Governor Stephen Poloz. In the U.S, the focus is on durable goods orders. Core durable goods orders are expected to drop to 0.5%, while durable goods orders is forecast to drop -0.9%, which would mark a second straight decline. On Thursday, the U.S will publish Final GDP for the first quarter and unemployment claims.
As the second quarter draws to a close, the U.S economy continues to perform well. Economic growth has been strong and the labor market is close to capacity. However, the trade war between the U.S and its major partners could be the dark cloud on the horizon. The Federal Reserve now plans to raise rates four times in 2018 (up from three), but a global trade war could force the Fed to revise its forecast back to three hikes. On Tuesday, Atlanta Fed bank president Raphael Bostic said that if the trade war intensified, he would vote against a fourth rate hike, due to downside risks to the economy. Fed Chair Jerome Powell sounded pessimistic about the economic effects of trade tensions at an ECB forum earlier in June, and if other Fed members express concerns, the Fed could delay a fourth hike until 2019.
The Bank of Canada has dropped hints that it is ready to raise rates in the second half of 2018, but policymakers have concerns both internally and on the global stage. The escalating trade war between the U.S and China could have serious repercussions for the Canadian economy. President Trump hasn’t spared Canada from tariffs, and with 80% of Canadian exports headed to the U.S, Canada can ill-afford a trade spat with its giant southern neighbor. On the domestic front, Canadian consumer inflation and spending data was softer than expected. Retail Sales was dismal, with a sharp drop of 1.2 percent. Despite these soft numbers, the BoC remains confident about the economy, and a July rate hike remains a reasonable possibility. Inflation is still above the target of 2.0%, and in its May policy statement the BoC removed its reference to “cautious”, replacing it with “gradual” describing its approach to rate adjustments. The markets viewed this as a signal that the bank is preparing to press the rate trigger. A rate hike would likely boost the Canadian dollar, as it makes the currency more attractive to investors.
USD/CAD Fundamentals
Wednesday (June 27)
- 8:30 US Core Durable Goods Orders. Estimate 0.5%
- 8:30 US Durable Goods Orders. Estimate -0.9%
- 8:30 US Goods Trade Balance. Estimate -68.9B
- 8:30 US Preliminary Wholesale Inventories. Estimate 0.2%
- 10:00 US Pending Home Sales. Estimate 0.4%
- 10:30 US Crude Oil Inventories. Estimate -2.4M
- 11:00 US FOMC Member Quarles Speaks
Thursday (June 28)
- 8:30 US Final GDP. Estimate 2.2%
- 8:30 US Unemployment Claims. Estimate 220K
*All release times are DST
*Key events are in bold
USD/CAD for Wednesday, June 28, 2018
USD/CAD, June 27 at 7:45 DST
Open: 1.3303 High: 1.3327 Low: 1.3297 Close: 1.3315
USD/CAD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.3067 | 1.3160 | 1.3292 | 1.3436 | 1.3550 | 1.3637 |
USD/CAD ticked higher in the Asian session and has been choppy in European trade
- 1.3292 remains a weak support line
- 1.3436 is the next resistance line
- Current range: 1.3292 to 1.3436
Further levels in both directions:
- Below: 1.3292, 1.3160, 1.3067 and 1.2970
- Above: 1.3436, 1.3530 and 1.3637