The Canadian dollar is drifting in the Friday session. Currently, USD/CAD is trading at 1.2707, up 0.01% on the day. On the release front, Canada will release a host of CPI indicators, led by CPI. This key indicator is expected to rebound with a gain of 0.4% in January. In December, CPI declined 0.4%, its first decline in six months. In the US, there are no data releases, but we’ll hear from three FOMC members – William Dudley, Loretta Mester and John Williams.
Canadian retail sales reports, released on Thursday, were dismal in December. Core Retail Sales plunged 1.8%, well of the estimate of +0.1%. This marked the sharpest decline since January 2015. It was a similar story with Retail Sales, which fell 0.8%, missing the estimate of 0.0%. This was the indicator’s worst showing since March 2016. The soft readings pushed USD/CAD as high as 1.2754 on Thursday, its highest level since late December. The Canadian dollar has dropped 1.2% this week, and if CPI also misses expectations, the slide could continue.
Investors remain wary after the recent stock market turbulence, which wiped off some $4 trillion in valuations. A key factor in the sharp correction was investor concern that higher inflation in the US would trigger more interest rate hikes. This has led to close monitoring of any releases connected to the Federal Reserve, and led to high anticipation ahead of the release of the January minutes on Wednesday. There were no major revelations in the minutes, and policymakers did not discuss a quicker pace of rate hikes. Still, policymakers hinted that further rate hikes could be in the cards, due to strong economic conditions in the US. In the words of the minutes, policymakers “anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labor market conditions would strengthen further”. At the December meeting, the Fed penciled in three rate hikes in 2018, but there is growing sentiment in the markets that the Fed may have to raise rates four or even five times this year. As for inflation, the minutes did not reveal any concern, with most Fed members were of the opinion that inflation would rise towards the Fed target of 2 percent.
USD/CAD Fundamentals
Friday (February 23)
- 8:30 Canadian CPI. Estimate 0.4%
- 8:30 Common Common CPI
- 8:30 Canadian Median CPI
- 8:30 Canadian Trimmed CPI
- 8:30 Canadian Core CPI
- 10:15 US FOMC Member William Dudley Speaks
- 11:00 US Fed Monetary Policy Report
- 13:30 US FOMC Member Loretta Mester Speaks
- 15:40 US FOMC Member John Williams Speaks
*All release times are GMT
*Key events are in bold
USD/CAD for Friday, February 23, 2018
USD/CAD, February 23 at 6:20 EST
Open: 1.2706 High: 1.2726 Low: 1.2698 Close: 1.2707
USD/CAD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.2351 | 1.2494 | 1.2630 | 1.2757 | 1.2855 | 1.2920 |
USD/CAD inched higher in the Asian session but has given up these gains in the European session
- 1.2630 is providing support
- 1.2757 is the next resistance line
- Current range: 1.2630 to 1.2757
Further levels in both directions:
- Below: 1.2630, 1.2494, 1.2351 and 1.2190
- Above: 1.2757, 1.2855 and 1.2920
OANDA’s Open Positions Ratio
USD/CAD ratio is unchanged in the Friday session. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards USD/CAD breaking out and moving lower.