USD/CAD: probability of rate increase in Canada increased in January

After yesterday, at the beginning of the US trading session were simultaneously published macro statistics on the US and Canada, the USD/CAD literally collapsed. The fall in the hour was about 100 points. Then the pair fell further, but managed to recover slightly to the end of yesterday's trading day, closing near the 1.2740 mark.

Negative factor for the US dollar was the publication of revised previously published data on US GDP for the 3rd quarter (+ 3.2% instead of + 3.3%). Despite the fact that the US GDP growth rates are record since the beginning of 2015, this did not stop the dollar from falling.

The basic index of real spending on personal consumption for November was also revised downward (1.3% in Q3, instead of 1.4%, according to the preliminary release).

The US dollar was put under pressure, despite the publication of the index of leading indicators Conference Board, which rose in November by 0.4%, to 130.9 after rising in October and September. The index of leading indicators consists of 10 components, including initial applications for unemployment benefits, production orders and changes in the S&P500 index. Economists note that the November growth of the index signals the continuation of strong economic growth in the first half of 2018.

Simultaneously with the publication of updated data on US GDP, inflation indicators were published for Canada. The total consumer price index (Total CPI) of Canada in November rose by 2.1% in annual terms (the forecast was + 2.0%). Compared to the previous month, the price increase was 0.3%.

Basic inflation in Canada also accelerated. Indicators of annual core inflation showed growth to the range of 1.5% -1.9%, while the average value of 1.7% became the maximum for more than a year.

In addition, the October report on retail sales in Canada also exceeded expectations.

At the beginning of the month, the Bank of Canada kept the interest rate at the current level of 1.0%. Prior to this, the bank twice this year raised rates - in July and September. Inflation remains below the target level of 2%. The head of the Bank of Canada, Poloz noted earlier that the target range for inflation is 1% -3%, and said that the decline in the Canadian dollar will support exports. Now, after yesterday's publication on inflation indicators and retail sales, traders estimate the likelihood of a rate hike in Canada in January at 50%.

The focus of traders today will be the publication at 13:30 (GMT) of Canada's GDP data for October. GDP is expected to grow by 0.2% compared with September. This will mean that the data generally correspond to growth in the 4th quarter at the level of 2%.

Also at the same time (13:30 GMT) we are waiting for data from the US, when important macro statistics (final values) for November will be published, including inflation indices (personal income / expenditure of Americans, personal consumption expenditure), orders for goods durable. The growth is expected in comparison with the previous month, which should positively affect the US dollar.

In this connection, once again it is worth remembering yesterday, when the dollar collapsed after the published updated data on GDP for the 3rd quarter turned out to be worse than the preliminary figures. Although in the US came out, in general, positive macro data, the fact that they were worse than the forecast, was the reason for selling the dollar.

A little later (at 15:00) will be reported on the sales of new homes in the US for November.

If today's publication of data on the US and Canada will resemble yesterday, the story of the fall of the pair USD / CAD may repeat.

In the opposite scenario, if the US data is better than forecasted values, the US dollar will partially compensate for yesterday's losses.

*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Support levels: 1.2700, 1.2620, 1.2500, 1.2430, 1.2300, 1.2170, 1.2100, 1.2050

Resistance levels: 1.2740, 1.2780, 1.2835, 1.2900

Trading Scenarios 

Sell Stop 1.2690. Stop-Loss 1.2750. Take-Profit 1.2620, 1.2500, 1.2430, 1.2300, 1.2170, 1.2100, 1.2050

Buy Stop 1.2750. Stop-Loss 1.2690. Take-Profit 1.2780, 1.2835, 1.2900

*) For up-to-date and detailed analytics and news on the forex market visit Tifia Forex Broker website tifia.com