USD/CAD

The Canadian dollar is almost unchanged on Thursday, in light trading ahead of the Christmas holiday. In the European session, USD/CAD is trading at 1.3860. Taking a look at economic events, there are no Canadian releases on Thursday. Today’s key event is US Unemployment Claims.

USD/CAD retreated on Wednesday, despite an unimpressive GDP reading in October of 0.0%, pointing to a lack of economic growth. Still, this was an improvement over the September reading of -0.5%. Core Retail Sales followed suit, also posting a flat reading of 0.0% after a decline of -0.5% a month earlier. There are no real surprises in these weak figures, as the Canadian economy has been hit hard by the steep decline in oil prices, particularly in oil-producing areas locations such as Alberta. This situation has hurt the Canadian dollar, which briefly pushed above the 1.40 level last week, and continues to trade at multi-low levels.

In the US, Durable Goods reports were unimpressive, underscoring weakness in the US manufacturing sector. Core Durable Goods slipped by 0.1%, short of the forecast of a 0.1% gain. Durable Goods came in at 0.0%, but this beat the estimate of -0.6%. Housing numbers also disappointed, as New Home Sales dipped to 490 thousand, well off the estimate of 507 thousand. This reading comes on the heels of Existing Home Sales, which posted a weak reading of 4.76 million, its worst performance since April 2014. There was some good news from consumer indicators, as the UoM Consumer Sentiment improved to 92.6 points, above the forecast of 92.1 points and marking a 4-month high.

After months of standing on the sidelines, the Federal Reserve finally pressed the rate trigger, raising interest rates by 0.25 percent, the first rate hike since June 2006. The Fed dropped a broad hint in its October policy meeting about a rate hike before the end of 2015, and predictably, investors and traders were busy trying to guess whether the Fed would indeed press the rate trigger. To the credit of Fed chief Janet Yellen and her colleagues, the Fed put into place a carefully-crafted strategy, sending a steady of stream of signals that it was intending to tighten monetary policy, if economic conditions remained positive. This gave the markets ample time to price in a rate hike, and currency market volatility was not excessive after the US rate hike, the first in almost 10 years. Although a hike of 0.25 percent is expected to have limited economic impact, the Fed move has given the US economy a critical vote of confidence, and this will be duly noted by the global markets. As well, this move is expected to be the first in a series of incremental rate hikes over the course of 2016, and higher interest rates means that the US dollar will become even more attractive to investors, at the expense of other currencies, which could spell bad news for the wobbly Canadian dollar.

USD/CAD Fundamentals

Wednesday (Dec. 23)

• 13:30 Canadian Core Retail Sales. Actual 0.0%
• 13:30 Canadian GDP. Actual 0.0%
• 13:30 US Core Durable Goods Orders. Estimate 0.1%. Actual -0.1%

Thursday (Dec. 24)

• 13:30 US Unemployment Claims. Estimate 270K
• 15:30 US Natural Gas Storage. Estimate -26B. Actual -32B

*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Thursday, December 24, 2015

USD/CAD December 24 at 11:20 GMT

USD/CAD 1.3859 H: 1.3841 L: 1.3856

USD/CAD Technical

• USD/CAD has been flat in the Asian and European sessions, continuing the pattern which has marked the pair for most of the week.
• 1.3757 is providing support.
• 1.3865 and has switched to a resistance role. It is a weak line and could see further action during the day.
• Current range: 1.3865 to 1.40

Further levels in both directions:

• Below: 1.3757, 1.364o and 1,3555
• Above: 1.3865, 1.40 and 1.4165

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged, reflective of the lack of movement from the pair. Short positions have a commanding majority (65%), indicative of trader bias towards USD/CAD moving lower.