USD/CAD – Canadian dollar edges higher as U.S inflation weakens

The Canadian dollar is slightly higher in the Wednesday session. Currently, USD/CAD is trading at 1.3355, down 0.27% on the day. On the release front, Canadian Utilization Capacity Rate dropped for a second straight month, coming in at 82.6 percent. This missed the estimate of 85.8 percent. In the U.S., consumer inflation reports softened in November, but matched the estimates. CPI dipped to 0.0 percent and Core CPI fell to 0.2 percent. On Thursday, Canada releases ADP nonfarm payrolls and the U.S. publishes unemployment claims.

Only a few months ago, the booming U.S. economy led to speculation that the Federal Reserve would continue raising rates in 2019, possibly up to four times. Since then, signs of a slowdown in the economy have caused the Fed to reassess its “gradual rate hike” policy, and many analysts are predicting just one rate hike next year. Three rate hikes so far this year have slowed economic growth, as seen by lower GDP readings and a dismal nonfarm payrolls report for November. Still, the Fed is widely expected to raise rates at the policy meeting on December 19, with the CME setting the odds of a hike at 80 percent.

The Bank of Canada remains in caution mode, even after strong employment numbers on Friday. The economy created over 94 thousand jobs, crushing the estimate of 10.1 thousand. As well, the unemployment rate dropped from 5.8 percent to 5.6 percent. However, all is not well with the economy, as GDP declined 0.1% in September, the second decline this year. The bank held interest rates at its policy meeting last week and is expected to do so again in January.

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USD/CAD Fundamentals

Wednesday (December 12)

• 8:30 Canadian Capacity Utilization Rate. Estimate 85.8%. Actual 82.6%
• 8:30 US CPI. Estimate 0.0%. Actual 0.0%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 10:30 US Crude Oil Inventories. Estimate -3.0M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -193.5B

Thursday (December 13)

• Tentative – Canadian ADP Nonfarm Employment Change
• 8:30 Canadian NHPI. Estimate 0.0%
• 8:30 US Unemployment Claims. Estimate 226K

*All release times are DST

*Key events are in bold

USD/CAD for Wednesday, December 12, 2018

USD/CAD, December 12 at 9:15 EST

Open: 1.3391 High: 1.3399 Low: 1.3340 Close: 1.3355

USD/CAD Technical

In the Asian session, USD/CAD ticked lower. The pair was flat in the European session and has posted small losses in North American trade

• 1.3292 is providing support
• 1.3382 has switched to resistance following losses by USD/CAD on Wednesday
• Current range: 1.3292 to 1.3382

Further levels in both directions:

• Below: 1.3292, 1.3198 and 1.3099
• Above: 1.3382, 1.3461, 1.3552 and 1.3696

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