USD/CAD – Steady Ahead of Key US Data

USD/CAD is steady in Monday trading, ahead of  two major US releases two key indicators later in the day. The US dollar pushed across the parity line late last week and was testing the 1.01 line earlier on Monday. In the US, New Home Sales was a big disappointment, dropping to a six-month low. The markets will be hoping that Pending Home Sales looks sharper. As well Core Durable Goods Orders will be released. There are no Canadian economic releases on Monday. Bank of Canada head Mark Carney will address a financial forum in Zurich.

In Canada, the loonie remains under pressure following a statement by the Bank of Canada, after it maintained interest rates at 1.0%. The BOC took a dovish view of the Canadian economy, stating that the economy has not improved as much as hoped, and that the economy was not expected to return to full capacity until the latter half of 2014. The central bank downgraded its forecast of the economy's growth from 2.4% in its October forecast, to just 2.0%. The BOC noted that inflation remains very low, and global demand for Canadian manufactured exports is modest. This means that unless there is a dramatic recovery, we won't see a hike in interest rates anytime soon. This has disappointed investors who would like to take advantage of higher rates sooner rather than later.

In the US, uncertainty about the extent of the recovery lingers, as economic data continues to point in all directions. The employment situation appears to be improving, as the Unemployment Claims indicator has looked outstanding for the past two weeks. Retail Sales also has looked sharp. On the other hand, we continue to see sluggish manufacturing and consumer sentiment data. On Friday, New Home Sales declined to 369 thousand, way off the estimate of 387 thousand. With the US economic indicators sending mixed signals about the extent of the recovery, the uncertainty is likely to be reflected in the currency markets. The US Federal Reserve has not been in the headlines lately, but is busy at work, as it increased its purchases of securities in January from $40 billion to $85 billion. This has pushed  the Fed’s balance sheet to a record $3 trillion. Despite these measures, the US recovery remains slow, and unemployment is still high at 7.8%. The markets will be paying close attention to the Fed’s take on the economy, when it meets for a key policy meeting this week.

 

USD/CAD for Monday, Jan 28, 2013

Forex Rate Graph 28/1/13

USD/CAD January 28 at 13:40 GMT

1.0088 H: 1.01 L: 1.0074

 

S3 S2 S1 R1 R2 R3
0.9954 1.0003 1.0041 1.01 1.0157 1.0207

 

USD/CAD continues to post gains, and was testing resistance at the round number of 1.01. This is followed by resistance at 1.0157. On the downside, 1.0041 is providing weak support. This is followed by support at 1.003, which is protecting the parity level.

Current range: 1.0041 to 1.01.

Further levels in both directions:

  • Below: 1.0041, 1.0003, 0.9954, 0.9898, 0.9833, 0.9809 and 0.9767.
  • Above: 1.01, 1.0157, 1.0207, 1.0286, 1.0365 and 1.0443.

OANDA's Open Position Ratios

The USD/CAD ratio is showing movement in favor of short positions. This is reflected in the current trend of the pair, as the US dollar has been making impressive headway against the loonie. If the movement in the ratio continues, look for further volatility from USD/CAD.

The US dollar pushed above parity late last week, and continues to show momentum, as the pair tests the 1.01 line. With two key US releases later on Monday, we could see more movement from USD/CAD later in the day.

USD/CAD Fundamentals

  • 13:30 US Core Durable Goods Orders. Estimate 0.8%
  • 13:30 US Durable Goods Orders. Estimate 1.8%
  • 15:00 US Pending Home Sales. Estimate 0.5%
  • 16:00 BOC Governor Mark Carney Speaks

 

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.