USD/CAD – Canadian Dollar Pauses After Sharp Losses, CPI and Retail Sales Next

USD/CAD is showing limited movement on Friday, following strong gains in the Thursday session. Currently, the pair is trading at 1.3240. On the release front, Canada will release key consumer inflation and retail sales data for September. If market predictions are accurate and the indicators improve from August, the Canadian dollar could record gains in the North American session.

On Wednesday, the Bank of Canada maintained its benchmark rate at 0.50%, where it has been pegged since July 2015. The bank downgraded forecasts for economic growth, projecting GDP to grow 1.1 percent in 2016, down from its forecast of 1.3 percent in July. For 2017, growth is expected at 2.0 percent, down from 2.2 percent in July. The bank stated that the lower forecasts were a result of weaker housing demand and lower export forecasts. The Canadian dollar showed little reaction after the rate announcement, but dropped 100 points on Thursday, as the currency continues to struggle against its US counterpart.

The markets have cheered as US jobless claims have dropped and dropped, so there was some surprise as the key indicator climbed to 260 thousand last week, higher than the forecast of 251 thousand. This marked the first reading since August that the key indicator has not beat estimates. Still, the dollar didn’t lose any ground, as the 4-week daily average of jobless claims remains excellent. There was good news from the manufacturing front, as the Philly Fed Manufacturing Index posted a strong gain of 9.7 points, easily beating the forecast of 5.2 points. Earlier in the week, US consumer inflation numbers were a mixed bag. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 68 percent, as market sentiment remains high that the Fed will press the rate trigger before the end of the year.

USD/CAD Fundamentals

Friday (October 21)

• 8:30 US Core CPI. Estimate 0.2%

• 8:30 US Core Retail Sales. Estimate 0.4%

• 8:30 US CPI. Estimate 0.2%

• 8:30 US Retail Sales. Estimate 0.5%

• 10:15 FOMC Member Daniel Tarullo Speaks

Open: 1.3228 High: 1.3257 Low: 1.3225 Close: 1.3241

USD/CAD Technical

• USD/CAD has shown limited movement in the Asian and European sessions

• 1.3120 has some breathing room in support following sharp gains by USD/CAD on Thursday

•  1.3120 was tested  earlier in resistance and is a weak line. It could see further action during the Friday session

Further levels in both directions:

• Below: 1.3120, 1.3028, 1.2922 and 1.2815

• Above: 1.3253, 1.3371 and 1.3457

• Current range: 1.3120 to 1.3253