USD/CAD: Subdued As U.S. Inflation, Retail Sales Within Expectations

USD/CAD: Subdued As U.S. Inflation, Retail Sales Within Expectations

Kenny Fisher  | Jan 12, 2018 10:48

USD/CAD is subdued in the Friday session. Currently, the pair is trading at 1.2535, up 0.08% on the day. On the release front, there are no Canadian events. In the U.S., Retail Sales and CPI reports were within expectations.

There was unexpected news out of China on Wednesday. A report that China was considering slowing the purchase of U.S. government bonds shook up the currency markets and sent the Canadian dollar lower. China boasts the largest currency reserves, estimated at $3 trillion. It is also the biggest holder of U.S. government bonds, in the amount of $1.19 trillion. China is unlikely to halt all purchases, but its vast holdings of U.S. bonds could serve as leverage in a trade war with the U.S. President Donald Trump has railed against the U.S. trade imbalance with China, and by serving notice, that it might reduce its U.S. Treasury purchases, China appears to be flexing some muscle. If China does indeed make any moves regarding these bond purchases, traders can expect sharp market movement.

After strong gains in December, the Canadian dollar has held its own against the greenback in January. There are two important factors for this positive trend. First, Canada has recorded outstanding employment numbers in the past two months. In December, the economy added 78,600 jobs, defying experts who predicted a minuscule gain of 1,800. This release comes on the heels of a superb November release, when the economy added 79,500 news jobs. The unemployment rate dropped to 5.7% in December, down from 5.9% a month earlier. Second, the recent rise in oil prices, which are up 6.8% since mid-December, has boosted the commodity-based Canadian currency. The BoC is expected to raise rates later this month, which could boost the Canadian dollar.

USD/CAD Fundamentals

Friday (Jan. 12)

  • 8:30 US CPI. Estimate 0.1%. Actual 0.1%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.3%
  • 8:30 US Core Retail Sales. Estimate 0.4% Actual 0.4%
  • 8:30 US Retail Sales. Estimate 0.5%. Actual 0.4%
  • 10:00 US Business Inventories. Estimate 0.3%

*All release times are GMT

*Key events are in bold

USD/CAD for Friday, Jan. 12, 2018

USD/CAD for Jan. 11-12, 2018.

USD/CAD, Jan. 12 at 8:40 EDT

Open: 1.2521 High: 1.2554 Low: 1.2508 Close: 1.2535

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2190 1.2351 1.2494 1.2630 1.2757 1.2860

USD/CAD ticked higher in the Asian session. In European trade, the pair edged upwards but has since retracted, erasing the earlier gains

  • 1.2494 is providing support
  • 1.2630 is the next resistance line
  • Current range: 1.2494 to 1.2630

Further levels in both directions:

  • Below: 1.2494, 1.2351, 1.2190 and 1.2060
  • Above: 1.2630, 1.2757 and 1.2860

OANDA’s Open Positions Ratio

USD/CAD ratio continues to show little movement this week. Currently, long positions have a majority (58%), indicative of trader bias towards USD/CAD reversing directions and moving to higher ground.

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.

Kenny Fisher

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