USD/CAD – Canadian dollar Jumps on Strong CPI

The Canadian dollar has improved in the Friday session. Currently, USD/CAD is trading at 1.3082, down 0.56% on the day. On the release front, Canada’s monthly CPI was unexpectedly strong, climbing 0.5%. This easily beat the estimate of 0.1%. Other inflation indicators looked strong, with readings around 2.0%. There was more good news as Foreign Securities Purchases jumped to C$11.55 billion, crushing the estimate of C$4.91 billion. In the U.S, Preliminary UoM Consumer Sentiment disappointed, dropping from 97.1 to 95.3 points. This missed the forecast of 98.1 points.

A booming U.S economy and investor jitters over global trade tensions have dampened risk appetite and weighed on the Canadian dollar, as nervous investors have snapped up the U.S currency. On Wednesday, USD/CAD touched a high of 1.3175, its highest level since July 16. Strong U.S data continues to boost the greenback, and this was the case on Wednesday, as retail sales were unexpectedly strong. Core retail sales posted a gain of 0.5% for a second straight month, easily beating the forecast of 0.1%. If consumer confidence follows suit with a strong reading on Friday, it could be a sign of another strong quarter of economic growth.

Canada has not been immune to U.S tariffs on steel and aluminum, and another headache for Canadian policymakers has been the renegotiation of the NAFTA accord, as the talks have failed to produce a new agreement thus far. Still, officials in Canada and Mexico are hopeful that the flexibility that the U.S has shown towards the European Union regarding trade issues will extend to NAFTA as well. Canadian and Mexican officials are hoping to reach an agreement, despite U.S President Trump’s stated preference for bilateral agreements over multilateral accords. NAFTA is a key component of the Canadian economy and with 80% of the country’s exports headed the U.S., the lingering delays in reaching a new NAFTA accord have weighed on the Canadian dollar. If the parties are able to reach a new agreement, traders can expect the Canadian dollar to move higher.

  Dollar softens amid greater risk appetite

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USD/CAD Fundamentals

Friday (August 17)

  • 8:30 Canadian CPI. Estimate 0.1%. Actual 0.5%
  • 8:30 Canadian Common CPI. Actual 1.9%
  • 8:30 Canadian Foreign Securities Purchases. Estimate 4.91B. Actual 11.55B
  • 8:30 Canadian Median CPI. Actual 2.0%
  • 8:30 Canadian Trimmed CPI. Actual 2.1%
  • 8:32 Canadian Core CPI. Actual 0.2%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 98.1. Actual 95.3
  • 10:00 US CB Leading Index. Estimate 0.4%. Actual 0.6%
  • 10:00 US Preliminary UoM Inflation Expectations. Actual 2.9%

*All release times are DST

*Key events are in bold

USD/CAD for Friday, August 17, 2018

USD/CAD, August 17 at 10:00 DST

Open: 1.3156 High: 1.3170 Low: 1.3066 Close: 1.3082

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.2831 12970 1.3067 1.3160 1.3292 1.3436

USD/CAD was flat in the Asian and European sessions. The pair has posted considerable losses in North American trade

  • 1.3067 was tested earlier in support. It is a weak line and could see further action in the North American session
  • 1.3160 is the next resistance line
  • Current range: 1.3067 to 1.3160

Further levels in both directions:

  • Below: 1.3067, 1.2970, 1.2831 and 1.2733
  • Above: 1.3160, 1.3292 and 1.3436
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