Since September this year, the USD/CAD pair has been trying to recover the huge losses it encountered in May when the pair fell from a one hear high of 1.3786.
From May, the dollar experienced significant losses not only against the Canadian dollar but also among other currencies as shown in the dollar index chart below.
The sell-off on the dollar can be attributed to several factors. First, the current U.S administration seems to favor a lower dollar, which makes exports more attractive. Second, there are efforts by some oil countries to dump the dollar. Third, other economies that make up the dollar index have done well economically.
Yesterday, the U.S. association of realtors released its data that showed that the existing home sales exceeded expectations. The organization data showed that 5.81 million homes were sold compared to the expected 5.54 million.
30 minutes later, the EIA released its crude oil inventory data that showed increased draw down in the inventories. It released data of 6.4 million barrels against the expected 3.79 million. This pushed the West Texas Intermediary (WTI) to above $58, the highest level since 12th December.
Yesterday, the senate passed the tax reform package which saw the dollar gain initially before seeing some pullback after it emerged that the bill will be signed into law in January, instead of the expected before Christmas date.
Further, the dollar lost as the government shutdown issue comes up. As a result of the disagreements between the democrats and republicans, there are higher chances that the government shutdown could happen.
Today, while we expect significant data from the U.S and Canada, I believe most impact will come from the shut down roumers.
In the U.S., we will receive the QoQ GDP growth and later on the Philadelphia Fed manufacturing index.
From Canada, we will receive the inflation data, the employment data from ADP, and retail sales.