USD/CAD – Canadian dollar subdued as Fed leaves investors with sour taste

The Canadian dollar is almost unchanged on Tuesday. In the North American session, the pair is trading a t1.3408, down 0.03%. In the U.S., building permits slowed to 1.30 million, shy of the estimate of 1.32 million. CB consumer confidence is expected to improve to 132.1 points. On Wednesday, Canada releases trade balance.

Stock markets dived on Friday after U.S. treasury bonds indicated the dreaded inverted yield curve, which is considered a recession indicator. Canadian bonds are also the inverted yield curve, pointing to a growing risk of recession. The Bank of Canada has taken a page out of the Federal Reserve playbook, freezing rates so far in 2019. If economic data remains lukewarm, the bank may have to consider a rate cut later in the year.

The Federal Reserve has become ever more dovish, leaving investors in a glum mood. At last week’s meeting, policymakers indicated they had no plans to raise interest rates in 2019 and also lowered its growth forecast for 2019 to 2.1%, down from 2.3% in December. There was more bad news on Friday, as the spread between 3-month and 10-year Treasury notes turned negative for the first time since 2007, pointing to an inverted yield curve. All eyes will be on U.S. Final GDP, which will be released on Thursday. If GDP is weaker than expected, investors could lose their risk apetite and the Canadian dollar could lose ground.

Asia breathes a sigh of relief

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USD/CAD Fundamentals

Tuesday (March 26)

  • 6:30 US FOMC Member Evans Speaks
  • 8:30 US Building Permits. Estimate 1.32M
  • 8:30 US Housing Starts. Estimate 1.22M
  • 9:00 US HPI. Estimate 0.4%
  • 9:00 US S&P/CS Composite-20 HPI. Estimate 4.3%
  • 10:00 US CB Consumer Confidence. Estimate 132.1
  • 10:00 US Richmond Manufacturing Index. Estimate 12

Wednesday (March 27)

  • 8:30 Canadian Trade Balance. Estimate -2.3B

*All release times are DST

*Key events are in bold

USD/CAD for Tuesday, March 26, 2019

USD/CAD, March 26 at 8:55 EST

Open: 1.3403 High: 1.3416 Low: 1.3380 Close: 1.3408

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.3200 1.3290 1.3383 1.3445 1.3552 1.3662

USD/CAD ticked lower in the Asian session and showed limited movement in European trade. The pair has posted gains at the start of North American trade

  • 1.3383 is a weak support level
  • 1.3445 is the resistance line
  • Current range: 1.3383 to 1.3445

Further levels in both directions:

  • Below: 1.3383, 1.3290, 1.3200 and 1.3125
  • Above: 1.3445, 1.3552 and 1.3662