USD/CAD – Loonie Edges Higher, US Posts Strong Data

After losing some ground to the US dollar on Wednesday, the Canadian dollar has moved slightly higher. The pair is currently trading in the 0.9850 range.  In the US, employment and housing numbers were exceptionally strong, while Building Permits matched market expectations.

After some mixed releases earlier in the week, the US posted some strong numbers on Thursday. Unemployment Claims, which had looked weak in January, roared back with its best performance in five years, dropping to 331 thousand new claims. This easily beat the forecast of 369K. Housing Starts also were outstanding, improving to 0.95 million. This beat the forecast of 0.89M, and was the indicator’s highest level since June 2008. Building Permits was not as spectacular, but also came within market expectations. The key indicator  remained at 0.90 million, just shy of the estimate of 0.91M. The strong numbers will raise hopes that the US economic recovery has taken a step forward, although the markets will want to see strong numbers in other sectors of the economy as well. Later today, the Philly Fed Manufacturing Index will be released. Given that earlier in the week, the Empire Manufacturing index looked dismal, the markets will be hoping for a turnaround from this key manufacturing indicator. So far, USD/CAD has not shown strong movement following the US releases, but this could change as North American markets digest this data.

In a report released this week, the World Bank downgraded its forecast for global growth. In its Global Economic Prospects report, which is issued twice a year, the prestigious institution said that global growth in 2013 would be 2.4%. This was down from the 3.0% estimate the World Bank stated in its June 2012 report. The World Bank noted persistent weaknesses in the economies of developed nations, citing austerity measures, high unemployment and weak business confidence. The report also sounded the alarm over the damage in market confidence due the ongoing fiscal battles in the US, and urged a quick resolution of the issue so as to ensure market stability.

US Federal Reserve Chairman Bernard Bernanke delivered remarks earlier this week, but those waiting for a dramatic announcement were disappointed. Bernanke steered away giving any clues about when the current round of QE might end and did little more than express his concern about the speed of the US recovery. He noted that the economy has shown signs of improvement, but he was still unsatisfied with the economy’s progress. Given these sentiments, it seems unlikely that the Fed will consider ending the current round of QE in 2013, barring a spectacular recovery by the US economy during the year. Underscoring this point, the president of the San Francisco Federal Reserve Bank, John Williams, stated that he expected the Fed to continue its bond buying program “well into the second half of 2013.” Although Bernanke avoided talking about QE, he was more forthcoming with regard to the debt ceiling issue, which is likely to be a hot topic, if not a full-blown crisis, in February. The US is quickly approaching its debt limit of $16.4 trillion, and Bernanke said Congress must act and raise the debt ceiling. He further noted that tinkering with interest rates will not make much difference, but that if Congress ensures that the country’s fiscal house is in order, interest rates would gradually rise as the economy improves.

USD/CAD for Thursday, Jan 17, 2013

USD/CAD January 17 at 14:50 GMT

0.9853 H: 0.9886 L: 0.9848

USD/CAD Technical

USD/CAD has shown slightly more acitivity, as the Candian dollar has recorded slight gains against the US dollar. However, the pair has not been able to sustain any significant momentum in either direction, and the proximate support and resistant lines (S1 and R1 above) have remained in place all week. The pair continues to receive support at 0.9833. This line is facing greater pressure, as USD/CAD edged lower. On the upside, 0.9898 is providing resistance. This line, which is protecting the 99 level, has held firm since early January.

• Current range: 0.9833 to 0.9898.

Further levels in both directions:

• Below: 0.9833, 0.9809, 0.9767, 0.9625 and 0.9526.
• Above: 0.9898, 0.9970, 1.0003, 1.0041 and 1.0157.

OANDA’s Open Position Ratios

The USD/CAD ratio remains static, as so far this week, the pair has been unable to sustain any momentum in either direction. Trader sentiment continues to be strongly biased towards the long position component, indicative of an expectation for the US dollar to show some improvement at the expense of the loonie. A sign of movement in the ratio could be an indication that the pair, which was been very subdued, will show some fluctuation.

USD/CAD has showed little movement, as the markets paid little attention to Fed Chair Bernard Bernanke’s comments, and then shrugged off a host of US data on Tuesday. Will the pair continue to drift? With the US releasing key employment and manufacturing data on Thursday, any unexpected readings could impact on the pair, which is resting comfortably in the mid-0.98 range.

USD/CAD Fundamentals

• 13:30 US Building Permits. Estimate. 0.91M. Actual 0.91M 
• 13:30 US Unemployment Claims. Estimate 369K. Actual 335K.
• 13:30 US Housing Starts. Estimate. 0.89M. Acutal 0.95M.
• 15:00 US Philly Fed Manufacturing Index. Estimate. 7.1 points.

*Key releases are highlighted in bold

*All release times are GMT

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