USDCAD – Canadian Dollar Trading Sideways, US Housing Reports Next

The Canadian dollar is showing little movement in the Friday session, continuing the trend we saw on Thursday. Currently, USD/CAD is trading at 1.2493, up 0.10% on the day. On the release front, Canada releases Manufacturing Production, which is expected to slow to 0.2% in December, after a strong 3.4% gain in November. In the US, Building Permits is expected to inch lower to 1.30 million, and Housing Starts are projected to improve to 1.23 million. As well, UoM Consumer Sentiment is expected to rise to 95.4 points.

The US dollar has been under pressure from rival currencies throughout the week, and the Canadian dollar has jumped on the bandwagon. On Wednesday, the Canadian currency posted its best one-day performance in 2018, gaining close to 1 percent against the greenback. The US dollar sagged as investors focused on poor retail sales reports in January. Retail Sales was flat at 0.0%, short of the estimate of 0.5%. Core Retail Sales declined 0.3%, well off the forecast of +0.2%. Last week’s market sell-off, which sent the US dollar higher against other currencies, was triggered by fears of higher inflation. The US has posted strong inflation numbers this week, and this has raised concerns that investors could again lose their risk appetite and send the Canadian dollar lower.

The recent volatility in the stock markets could affect US interest rate policy. Currently, the Fed has projected three hikes this year, but that could change to four or even five hikes, if inflation continues to head upwards and the robust US economy maintains its strong expansion.  The new head of the Federal Reserve, Jerome Powell, received a rude welcome from the stock markets, when he started his new position last week. Powell sought to send a reassuring message earlier this week, declaring that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

USD/CAD Fundamentals

• 8:30 Canadian Foreign Securities Purchases. Estimate 19.18B

• 8:30 Canadian Manufacturing Sales. Estimate 0.2%

• 8:30 US Building Permits. Estimate 1.29M

• 8:30 US Housing Starts. Estimate 1.23M

• 8:30 US Import Prices. Estimate 0.6%

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4

• 10:00 US Preliminary UoM Inflation Expectations

Open: 1.2481 High: 1.2494 Low: 1.2450 Close: 1.2493

USD/CAD Technical

USD/CAD edged lower in the Asian session but has recovered in European trade

• 1.2351 is providing support

• 1.2494 is under pressure in resistance

• Current range: 1.2351 to 1.2494

Further levels in both directions:

• Below: 1.2351, 1.2190 and 1.2060

• Above: 1.2494, 1.2630, 1.2757 and 1.2855