USD/CAD Forecast: Canadian dollar trading sideways, US retail reports ahead

Kenny Fisher MarketPulse

The Canadian dollar is unchanged in the Monday session. Currently, USD/CAD is trading at 1.3016, down 0.04% on the day. On the release front, the focus is on retail sales reports. Retail Sales is expected to gain 0.7%, while Core Retail Sales is forecast to climb 0.3%. The U.S Treasury is expected to release the semi-annual currency report. In Canada, the sole event is the Bank of Canada business outlook survey.

U.S. consumer inflation reports missed their estimates, and the Canadian dollar took advantage, posting gains on Thursday. CPI and Core CPI both posted small gains of 0.1%, shy of the estimate of 0.2%. On a year-to-year basis, CPI increased 2.3% in September, down from 2.7% in August. Still, with inflation above the Fed’s 2% inflation target, these readings are unlikely to affect the Fed’s plans to raise interest rates in December, which would mark the fourth rate increase this year. The likelihood of a rate hike remains high, with the CME pegging the odds at 76%.

With the U.S economy continuing to post strong numbers, the Federal Reserve is on track to raise rates in December. This would be the fourth rate hike in 2018, and the markets are expecting three more hikes in 2019. Not surprisingly, this has put pressure on the Bank of Canada to raise rates as well. The Canadian economy is in good shape, but not nearly as strong as its southern neighbor. The Bank of Canada holds its next policy meeting on October 24, and the strength of key Canadian releases will be a major factor as to whether policymakers raise rates.

USD/CAD Fundamentals

Monday (October 15)

8:30 US Core Retail Sales. Estimate 0.4%
8:30 US Retail Sales. Estimate 0.7%
8:30 US Empire State Manufacturing Index. Estimate 20.4
10:00 US Business Inventories. Estimate 0.5%
10:30 Bank of Canada Business Outlook Survey
Tentative – US Treasury Currency Report

Tuesday (October 16)

10:00 US JOLTS Openings. Estimate 6.90M S2

USD/CAD Technical

S3	S2	S1	R1	R1	R3
1.2733	12831	1.2970	1.3067	1.3067	1.3292

1.2970 is providing support
1.3067 is the next resistance line
Current range: 1.2970 to 1.3067

Further levels in both directions:

Below: 1.2970, 1.2831, 1.2733 and 1.2649
Above: 1.3067, 1.3198 and 1.3292

Author

Kenny Fisher

MarketPulse

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities.

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