USD/CAD Forecast: Canadian dollar subdued on light data

USD/CAD has ticked higher in the Tuesday session. Currently, the pair is trading at 1.3255, up 0.12% on the day. There are no Canadian events, and the sole U.S. indicator is a minor housing report. On Wednesday, the FOMC releases the minutes of its January policy meeting.

Traders should treat the Federal Reserve minutes as a market-mover. All eyes will be on the Federal Reserve on Wednesday, with the release of the minutes of its most recent meeting. The Fed acted aggressively in 2018, boosting rates four times in order to keep the red-hot U.S. economy from overheating. Since raising rates in December, however, the Fed has changed direction and become much more dovish. In late 2018, there was talk of up to four rate hikes in 2019, but the Fed has revised its forecast to two hikes. The markets have gone further, projecting no rate increases this year, and there has even been talk of a rate cut in late 2019. In the January rate statement, the Fed discarded previous pledges of “further gradual increases” in interest rates, and said it would be “patient” before any further hikes.

Is the U.S. economy slowing down? There are concerns about the strength of the economy, after soft consumer data in January. Retail sales and core retail sales showed sharp contraction, and these numbers came on the heels of soft inflation indicators. Inflation remains low, despite a strong labor market. CPI showed no change in January and has failed to post a gain since November. Core CPI has recorded weak gains of 0.2% for four successive months. On an annualized basis, CPI gained 1.6% in January, the weakest year-over-year gain since mid-2017. The soft inflation numbers were a result of low energy prices, which fell 3.1% in January as oil prices remain under pressure.

Markets in long-weekend slumber

Regional markets to have their say on President’s Day

 

USD/CAD Fundamentals

• 10:00 US NAHB Housing Market. Estimate 59

• 14:00 US FOMC Meeting Minutes

Open: 1.3240 High: 1.3263 Low: 1.3234 Close: 1.3255

 

USD/CAD Technical

USD/CAD ticked higher in the Asian session and is steady in European trade

• 1.3200 is providing support

• 1.3290 is the next resistance line

• Current range: 1.3200 to 1.3290

Further levels in both directions:

• Below: 1.3200, 1.3125 and 1.3049

• Above: 1.3290, 1.3383, 1.3445 and 1.3547