USD/CAD Forecast: Canadian dollar dips, U.S. jobless claims rise

The Canadian dollar has lost ground in the Thursday session. In the North American trade, the pair is trading at 1.3340, up 0.30% on the day. On the release, U.S. unemployment claims climbed to 229 thousand, above the estimate of 225 thousand. Canadian New Housing Price Index declined 0.1%, after posting five straight readings of 0.0%. On Friday, the U.S. publishes the Empire State Manufacturing Index and UoM Consumer Sentiment, and Canada releases manufacturing sales.

Was the Bank of Canada too aggressive with its rate hikes? The bank raised rates five times between July 2017 and October 2018, but has since stayed on the sidelines. With the Canadian economy in a slowdown, the bank could stay on the sidelines until the second half of 2019. The sharp jump in rates may have been too much for the economy to handle. One sore spot is the housing sector, which has declined for five straight months, as higher rates have made mortgages more expensive and reduced home purchases. If the economy does not rebound, policymakers will have to consider a rate cut, which could stimulate economic activity but would push the Canadian dollar downwards.

In the U.S., February consumer inflation numbers were soft, which means there is little pressure on policymakers to raise rates in the near future. Core CPI edged down to 0.1%, while CPI remained steady at 0.2%. Inflation remains well below the Federal Reserve’s target of 2.0 percent, so there is little pressure on the Fed to raise rates anytime soon. Policymakers have been signaling that the Fed could stay on the sidelines until the second half of 2019, and this stance was underscored by Fed Chair Powell in a television interview earlier this week. Powell left no doubt about where the Fed stands, saying that the Fed would remain patient and was in no hurry to change interest rate policy. The dovish stance of the Fed could weigh on the greenback, as a lack of rate hikes makes the greenback less attractive to investors.

Markets turn to the Eastern Front

Sterling off highs, waiting for extension vote

USD/CAD Fundamentals

Thursday (March 14)

• 8:30 Canadian NHPI. Estimate 0.0%. Actual -0.1%

• 8:30 US Import Prices. Estimate 0.3%. Actual 0.6%

• 8:30 US Unemployment Claims. Estimate 225K. Actual 229K

• 10:00 US New Home Sales. Estimate 622K

• 10:30 US Natural Gas Storage. Estimate -211B

• 18:50 BOC Senior Deputy Governor Carolyn Wilkins Speaks

Friday (March 15)

• 8:30 Canadian Manufacturing Sales. Estimate 0.4%

• 8:30 US Empire State Manufacturing Index. Estimate 10.1

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.5

• 10:00 US JOLTS Openings. Estimate 7.27M

Open: 1.3300 High: 1.3342 Low: 1.3387 Close: 1.3340

USD/CAD Technical

USD/CAD ticked higher in the Asian session and is showing little movement in European trade

• 1.3290 is providing support

• 1.3383 is the next resistance line

• Current range: 1.3290 to 1.3383

Further levels in both directions:

• Below: 1.3290, 1.3200 and 1.3125

• Above: 1.3383, 1.3445, 1.3552 and 1.3662