USDCAD Forecast: Punches above 1.30 as Canadian dollar sags, CPI next

The Canadian dollar has edged lower in the Thursday session. Currently, USD/CAD is trading at 1.3042, down 0.19% on the day. On the release front, Canada releases the New Housing Price Index, which is expected to post a gain of 0.1% for a third straight month. In the U.S., CPI and Core CPI are both expected to post gains of 0.2%. As well, unemployment claims are forecast to remain pegged at 207 thousand. On Friday, the U.S releases a key consumer confidence gauge, UoM Consumer Sentiment.

With bonds yields continuing to rise, investors have reacted negatively and stock markets continue to spin lower. With risk appetite taking a beating, investors gave a thumbs down to minor currencies like the Canadian dollar, sending USD/CAD above the symbolic 1.30 level on Wednesday. The markets will be keeping a close eye on U.S consumer inflation data – strong numbers would likely increase the likelihood of a December rate hike in the U.S and further boost the U.S dollar.

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.

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USD/CAD Fundamentals

• 8:30 Canadian NHPI. Estimate 0.1%

• 8:30 US CPI. Estimate 0.2%

• 8:30 US Core CPI. Estimate 0.2%

• 8:30 US Unemployment Claims. Estimate 207K

• 10:30 US Natural Gas Storage. Estimate 87B

• 11:00 US Crude Oil Inventories. Estimate 2.3M

• 13:01 US 30-year Bond Auction

• Tentative – US Treasury Currency Report

• 8:30 US Import Prices. Estimate 0.3%

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 100.4

• 10:00 US Preliminary UoM Inflation Expectations

• 12:30 US FOMC Member Raphael Bostic Speaks

• 12th-18th US Federal Budget Balance. Estimate 71.0B

• 10:30 US FOMC Member Randal Quarles Speaks

Open: 1.3068 High: 1.3069 Low: 1.3033 Close: 1.3042

USD/CAD Technical

USD/CAD was mostly flat in the Asian session. In European trade, the pair ticked lower but has recovered these losses and moved higher

• 1.2831 is providing support

• 1.2970 is a weak resistance line

• Current range: 1.2831 to 1.2970

Further levels in both directions:

• Below: 1.2831, 1.2733 and 1.2649

• Above: 1.2970, 1.3067, 1.3198 and 1.3292