USDCAD Forecast: Canadian dollar drifting ahead of U.S. retail sales

The Canadian dollar is showing limited movement in the Thursday session. Currently, USD/CAD is trading at 1.3223, down 0.14% on the day. On the release front, it’s a busy day in the United States. Retail sales and core retail sales are both expected to improve sharply, with estimates of 0.5% and 0.6%, respectively. The Philly Fed Manufacturing Index is expected to dip to 20.1 points, while unemployment claims are forecast to remain almost unchanged, at 213 thousand. Canada will release ADP nonfarm employment change. On Friday, Canada releases Manufacturing Sales.

On Wednesday, U.S consumer inflation numbers beat their estimates for October. The consumer price index posted a gain of 0.3%, its strongest gain since January. Core CPI, which excludes food and energy prices edged higher to 0.2%, marking a 3-month high. Both releases were in line with forecasts. Core CPI was 2.1% higher than a year ago, and this solid release means that the Fed remains on track to continue raising interest rates. The Federal Reserve holds its next policy meeting in December, with the odds of a December rate hike at 72%, according to the CME Group.

The Canadian dollar continues to struggle in November. Earlier in the month, USD/CAD touched a high of 1.3264, its highest level since July. The currency tends to lose ground when risk appetite is low, and trouble spots such as U.S-China relations, Brexit and the Italian budget crisis have unnerved global equity markets. A hawkish Federal Reserve has also led to investors snapping up U.S. dollars. With the U.S. economy firing on all cylinders and the Fed expected to continue its stance of gradual rate increases, the Canadian dollar could continue to face headwinds in November.

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USD/CAD Fundamentals

• 8:30 Canadian ADP Nonfarm Employment

• 8:30 US Core Retail Sales. Estimate 0.5%

• 8:30 US Retail Sales. Estimate 0.6%

• 8:30 US Philly Fed Manufacturing Index. Estimate 20.1

• 8:30 US Empire State Manufacturing Index. Estimate 19.9

• 8:30 US Import Prices. Estimate 0.1%

• 8:30 US Unemployment Claims. Estimate 216K

• 10:00 US FOMC Member Quarles Speaks

• 10:00 US Business Inventories. Estimate 0.3%

• 10:30 US Natural Gas Storage. Estimate 35B

• 11:00 US Crude Oil Inventories. Estimate 2.9M

• 11:30 US Fed Chair Powell Speaks

• 13:00 US FOMC Member Bostic Speaks

• 8:30 Canadian Manufacturing Sales. Estimate 0.1%

Open: 1.3242 High: 1.3250 Low: 1.3210 Close: 1.3224

USD/CAD Technical

USD/CAD ticked higher in the Asian session but then retracted. The pair has shown little movement in the European session

• 1.3198 is providing support

• 1.3292 is the next resistance line

• Current range: 1.3198 to 1.3292

Further levels in both directions:

• Below: 1.3198, 1.3099, 1.2970 and 1.2831

• Above: 1.3292, 1.3383 and 1.3461