USD/CAD – Canadian Dollar Dips, Inflation Data Next

The Canadian dollar has lost ground in the Monday session, erasing the gains seen on Friday. Currently, USD/CAD is trading at 1.2873, up 0.34% on the day. In Canada, the focus is on inflation data. The Raw Materials Price Index is expected to rebound with a gain of 0.6%, while the Industrial Product Price Index is forecast to edge higher to 0.2%. In the US, Personal Spending is predicted to improve to 0.4%, while the markets are braced for Pending Homes to slip by 0.6%. On Tuesday, Canada releases GDP and BoC Governor speaks at an event in Yellowknife. In the US, the main event is ISM Manufacturing PMI.

The US released the first GDP report for the first quarter, with a respectable gain of 2.3% which beat the estimate of 2.0 percent. Still, this was a significant drop from GDP in the fourth quarter of 2018, which came in at 2.8 percent. Analysts also took note of the Employment Cost Index, which rose from 0.6% to 0.8%, another indication that inflation is moving higher. There is growing sentiment that the Federal Reserve will raise interest rates four times this year, although Fed policymakers continue to project a total of three increases in 2018. One scenario envisions the Fed raising rates once each quarter until the economy shows signs of slowing down. If inflation continues to move higher and economic conditions remain strong, the US dollar could continue to make headway against its Canadian counterpart.

Bank of Canada Governor Stephen Poloz testified on Parliament Hill last week and delivered a message of cautious optimism about economic conditions. Poloz said that he expected the economy to improve after a disappointing first quarter and projected that inflation would push above BoC’s target of 2% later in 2018. The bank maintained the benchmark rate at 1.25% at its April meeting but is expected to raise rates as early as May. However, policymakers would prefer to see the NAFTA negotiations concluded before making any rate moves. The talks have made significant progress, but the critical auto pact remains a stumbling block. It is likely that a tentative agreement will be hammered out, perhaps as early as May.

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USD/CAD Fundamentals

Monday (April 30)

  • 8:30 Canadian RMPI. Estimate 0.6%
  • 8:30 Canadian IPPI. Estimate 0.2%
  • 8:30 US Core PCE Price Index. Estimate 0.2%
  • 8:30 US Personal Spending. Estimate 0.4%
  • 8:30 US Personal Income. Estimate 0.4%
  • 9:45 US Chicago PMI. Estimate 58.2
  • 10:00 US Pending Home Sales. Estimate 0.6%

Tuesday (May 1)

  • 8:30 Canadian GDP. Estimate 0.3%
  • 10:00 US ISM Manufacturing PMI. Estimate 58.6
  • 14:30 Bank of Canada Governor Stephen Poloz Speaks

*All release times are DST

*Key events are in bold

USD/CAD for Monday, April 30, 2018

USD/CAD, April 30 at 7:40 DST

Open: 1.2829 High: 1.2872 Low: 1.2829 Close: 1.2873

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2687 1.2757 1.2850 1.2943 1.3015 1.3125

USD/CAD inched higher in the Asian session and has posted stronger gains in European trade

  • 1.2850 has switched to a support role after gains by USD/CAD on Monday
  • 1.2943 is the next resistance line
  • Current range: 1.2850 to 1.2943

Further levels in both directions:

  • Below: 1.2850, 1.2757, 1.2687 and 1.2590
  • Above: 1.2943, 1.3015 and 1.3125

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little movement in the Monday session. Currently, short positions have a majority (60%), indicative of slight trader bias towards USD/CAD reversing directions and moving downwards.

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.