The Canadian dollar has posted considerable losses in the Thursday session. Currently, USD/CAD is trading at 1.3266, up 0.73% on the day. On the release front, Canadian ADP Nonfarm Employment Change plunged, posting a reading of -10,500. This was the first decline of 2018. In the U.S., manufacturing and employment data were better than expected. The Philly Fed Manufacturing Index climbed to 25.7, easily beating the estimate of 21.6 points. Unemployment claims dropped to 207,000, better than the estimate of 220,000. On Friday, the focus is on consumer indicators. CPI is expected to remain pegged at 0.1%, while retail sales are expected at 0.6%, which would be the first gain in 2018. Traders should be prepared for movement from the Canadian dollar in the North American session.
The tariff slugfest between the U.S. and its major trading partners has raised serious concerns not just with investors, but with Federal Reserve policy-makers as well. The Federal Reserve Beige Book for July, released on Wednesday, was rife with references to tariffs. This trend started in the April Beige Books after President Donald Trump threatened in March to impose tariffs on China. Most of the 12 Fed regional districts referred to tariffs in their individual reports, which make up the Beige Book. Some Fed policy-makers have also voiced their concern over the impact that tariffs could have on the U.S. economy and is an issue the Fed will have to take into consideration, as it mulls over rate policy for the next six months.
With trade tensions hovering, investors are keeping a close eye on the Canadian manufacturing sector. There was excellent news earlier in the week, as Manufacturing Sales in May rebounded with a gain of 1.4%, after a 1.3% decline a month earlier. Last week, the Bank of Canada raised rates by a quarter-point last week, to 1.50%. This is the highest level since December 2008. Will we see more rate hikes in 2018, as will likely be the case in the U.S.? The BoC rate statement said that “higher rates will be needed” in order to keep inflation close to the target of 2 percent. Policy-makers are keeping a close eye on the simmering trade war, which has seen Canada and the U.S. impose tariffs on each other’s products. If the Canadian economy can escape the trade war relatively unscathed, we could see another rate hike at the BoC policy meeting in September.
USD/CAD Fundamentals
Thursday (July 19)
- Canadian ADP Nonfarm Employment Change. Actual -10.5K
- 8:30 US Philly Fed Manufacturing Index. Estimate 21.6. Actual 25.7
- 8:30 US Unemployment Claims. Estimate 220K. Actual 207K
- 9:00 US FOMC Member Randal Quarles Speaks
- 10:00 US CB Leading Index. Estimate 0.4%
- 10:30 US Natural Gas Storage. Estimate 58B
Friday (July 20)
- Tentative – OEPC-JMMC Meetings
- 8:30 Canadian CPI. Estimate 0.1%
- 8:30 Canadian Core Retail Sales. Estimate 0.6%
- 8:30 Canadian Common CPI
- 8:30 Canadian Median CPI
- 8:30 Canadian Retail Sales. Estimate 1.0%
- 8:30 Canadian Trimmed CPI
- 8:30 Canadian Core CPI
*All release times are DST
*Key events are in bold
USD/CAD for Thursday, July 19, 2018
USD/CAD, July 19 at 8:00 DST
Open: 1.3170 High: 1.3259 Low: 1.3160 Close: 1.3266
USD/CAD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.2970 | 1.3067 | 1.3160 | 1.3292 | 1.3436 | 1.3530 |
USD/CAD was flat in the Asian session and has posted considerable gains in European trade
- 1.3160 is providing support
- 1.3292 is the next resistance line
- Current range: 1.3160 to 1.3292
Further levels in both directions:
- Below: 1.3160, 1.3067, 1.2970 and 1.2831
- Above: 1.3292, 1.3436 and 1.3530
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