October 1 2018

Oct. 1, 2018 (Western Union Business Solutions) – A dip in USDCAD to 4-month lows below 1.28 has moved the Value Indicator which in turn could do the same for those USD or CAD buyers that have been sitting on the fence.

The so-called Value Indicator – which is based on moving averages and offers a rough estimate of currency strength – is flashing undervalued after the big move lower in USDCAD. This is good news for USD buyers who are less than a month removed from the market being above 1.32. CAD buyers, on the other hand, continue to benefit from USDCAD having started 2018 below 1.26, amounting to a YTD gain of nearly 2%.

The tentative trade agreement reached between the U.S. and Canada has allowed a big cloud of uncertainty over the latter to dissipate. The trade deal, dubbed the U.S.-Mexico-Canada Agreement, still needs to be ratified by lawmakers. The USMCA reduced trade uncertainty and put the focus on Canada’s sturdy economy and expectations for the Bank of Canada to raise interest rates as soon as its next decision on Oct. 24.

USDCAD could see more volatility later this week when the U.S. and Canada release influential data Friday on jobs and trade, numbers that could also impact the interest rate outlook on both sides of the border.

If indeed USDCAD is undervalued, it could be evident in how it responds to the U.S. and Canadian labor market reports on Friday. Oct. 5, at 8:30 am, EST. The U.S. economy is forecast to add 180k new jobs in September from 201k in August, while the unemployment rate is expected to decline from 3.9% to 3.8%.