USD/CAD - US dollar to Canadian dollar

USD/CAD, or US dollar to Canadian dollar, is a major currency pair and is heavily traded in foreign exchange markets. Given that crude oil and refined petroleum products make up a significant portion of Canadian exports, USD/CAD tends to track global commodity prices. Similar to other commodity currency pairs, USD/CAD tends to depreciate during economic booms (CAD appreciates) while strengthening (CAD depreciates) during downturns. Looking at recent history, USD/CAD appreciated significantly during the 2008 financial crisis and following an emerging markets downturn in 2016. 

Outlook
Bullish

US dollar daily update

The US dollar is currently steady against all major currencies. Yesterday, the US dollar index (a broad measure of the currency) ended the day slightly lower after making four consecutive higher-highs earlier this week. While the buck was much weaker at the outset of the day, buyers pushed up the currency during New York trading hours. Today's US dollar index trading range remains 95.50 - 97.0. 

There are no fundamentals developments driving the dollar today. After most major financial assets entered overbought or oversold conditions earlier this week, currency markets are adjusting accordingly. Looking at the US dollar, there may be an opportunity to go long the currency if the buck falls towards the low-end of its trading range in the near future. 

Turning to economic data, initial jobless claims continued decelerating this week. This is a positive development for the US economy, and suggests that the labor market continues to fire on all cylinders. Given the Federal Reserve's mandate to maintain full employment, the health of the labor market is watched closely by the Fed. As all (backwards-looking) economic data points to accelerating growth and inflation, the Fed is more likely to continue raising rates. In turn, this helps the buck. Our outlook on the dollar remains bullish.   

USD/JPY is flat and currently trading above 110.80. EUR/USD is flat and trading above 1.1370. GBP/USD is flat, and currently above 1.2720.

Date Event Actual Previous
August 14 Export Prices YoY JUL 4.3% 5.3%
August 14 Import Prices YoY JUL 4.8% 4.7%
August 15 Retail Sales YoY JUL 6.4% 6.1%
August 15 Capacity Utilization JUL 78.1% 78.1%
August 15 Industrial Production YoY JUL 4.2% 4%
August 15 Manufacturing Production YoY JUL 2.8% 2.3%
August 15 Business Inventories MoM JUN 0.1% 0.3%
August 16 Building Permits JUL 1.311M 1.292M
August 16 Housing Starts JUL 1.168M 1.158M
August 16 Initial Jobless Claims 11/AUG 212K 214K
August 17 Michigan Consumer Sentiment Prel AUG 97.9
Updated 

Canadian dollar daily update

The Canadian dollar is currently mixed. The loonie is selling off against the euro and the Australian dollar, while strengthening against other major currencies. Yesterday, the loonie was the weakest major currency, ending the day lower against its peers. Despite a small rally in commodity prices and a softer US dollar, the Canadian dollar was out of favor, ending lower against the US dollar for the second consecutive day. Today's trading range for USD/CAD is 1.3080 - 1.3390.

Growing uncertainty regarding NAFTA negotiations is starting to weigh on the Canadian dollar. Yesterday, US trade representative Robert Lighthizer said he hopes there will be a breakthrough in NAFTA negotiations in the next few days. However, US President Donald Trump told Lighthizer that he is in no rush for a resolution, and is ready to walk away from talks if necessary. Trump said that "We’re either going to do a fair NAFTA for us or we’re not going to do NAFTA at all.” He added that “If you can’t make the right deal, don’t make it.” Trump has been vocal about NAFTA negotiations recently, casting doubt on whether or not the US, Mexico and Canada can reach an agreement.

Later today we'll see Canadian inflation numbers. Traders will be looking for signs that inflation is continuing to strengthen after last month's 2.5% year-over-year increase showed the biggest pick-up in inflation since 2012. Rising inflation is a major factor in the Bank of Canada's monetary policy, and continued strength increases the likelihood of future rate hikes. Yesterday we downgraded our outlook for the Canadian dollar to bearish.

The USD/CAD exchange rate is currently above 1.3130. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.4980. The pound is down slightly against the Canadian dollar, with GBP/CAD trading above 1.6710. CAD/JPY is flat, and currently trading above 84.30. 

Date Event Actual Previous
August 15 New Motor Vehicle Sales JUN 204.4K 220.3K
August 16 ADP Employment Change JUL 11.6K -10.5K
August 16 Manufacturing Sales MoM JUN 1.1% 1.4%
August 17 Core Inflation Rate YoY JUL 1.3%
August 17 Inflation Rate YoY JUL 2.5%
August 17 Foreign Securities Purchases JUN C$2.18B
August 17 Foreign Securities Purchases by Canadians JUN C$5.69B
Updated 

US dollar to Canadian dollar Outlook

Outlook
Bullish

Updated 

US dollar analysis

Even as US outlook darkens, US dollar set to keep strengthening

In our last commentary on the US dollar, we wrote that the buck was set to move higher given underlying economic trends. Specifically, US growth and inflation was likely to keep accelerating, while the opposite was likely to happen in most major regions outside the United States. Following the publication of our last commentary, the US dollar index has strengthened from around 91.80 to around...

Published 
Tags: US dollar

As US dollar rises, time to get bearish

In our previous commentary on the US dollar, we warned that a weak dollar was hiding significant risks in growth-sensitive assets such as equities and European currencies. As the world’s reserve currency, the buck is inversely correlated to most financial assets because most cross-border lending is conducted in dollars. Thanks to a slowdown in economic growth outside the United States coupled wit…

Published 
Tags: US dollar

US dollar weakness masks growing risks

In our previous take on the US dollar in early February, we wrote that the currency was set to remain weak. At the time, ex-US growth was accelerating, while speculator sentiment was only mildly bearish. While dollar bulls have argued that rate hikes should help the currency, we wrote that expectations for monetary tightening were rising around the world, limiting the impact from the Fed’s action…

Published 
Tags: US dollar

Canadian dollar analysis

Canadian dollar outlook: neutral as currency gets a big break

While the outlook for the Canadian dollar looked dire just a few months ago, the currency appears to have recently turned a corner. After looking oversold in late March, the currency managed to strengthen thanks to a rebound in crude oil prices. Two weeks later, the Canadian dollar received more good news as the Trump administration pushed to conclude NAFTA talks at a faster pace. In more recent …

Published 

Canadian dollar bulls cut their losses: COT Report

Looking at last week’s Commitment of Traders report, the only notable changes were relating to net positions in the Swiss franc, Canadian dollar and British pound. Changes in positioning were fairly limited for the US dollar, euro, gold and crude oil. Crude oil positions, based on 3-year trailing averages and net speculator positions as a proportion of total open interest, remains at a bullish ex…

Published 

Canadian dollar in vogue: COT report

When will the Canadian dollar rebound? We take a closer look at the Canadian dollar and what the latest Commitments of Traders report says about the currency. Bank of Canada remains cautious - impacting trader optimism, but better data has us rethinking an earlier prediction.

Published 

Economic calendar