USD/CAD – US Dollar Breaks Out as Canadian Data Disappoints

The US dollar took a short weekend break, but didn’t skip a beat as it continues to push higher against its Canadian counterpart. The pair pushed across the all-important parity line on Friday, and now has its eye on the 1.01 line. USD/CAD was trading in the 1.0080 range. The markets have plenty to chew on, as Canada released disappointing employment and housing numbers on Friday. In the US, the week wrapped on a positive note, as Trade Balance looked sharp.

Analysts have been saying that recent excellent Canadian employment numbers are not reflective of the Canadian economy, and Friday’s indicators appeared to drive that message home. Employment change was a disaster, as the indicator pointed to a loss of 21.9 thousand jobs. The markets had anticipated a gain of 4.5 thousand. The markets were not impressed, as the Unemployment Rate dropped from 7.2% to 7%, as the improvement could well have resulted from many unemployed people simply giving up. One analyst summed up the bleak news by stating that “it does look like the labour market caught up with the slow-growth reality”. There was more bad news, as Housing Starts slumped to 161,000, its worst showing in three years. The estimate stood at 196 thousand. The data points to weakness in the economy, and the Canadian dollar has taken a tumble, as it trades close to the 1.01 line.

In the US, last week ended on a positive note, as Trade Balance data looked sharp. The monthly deficit narrowed to $38.5 billion, well below the market forecast of $45.7 billion. This was the smallest deficit since January 2011. The markets also took note of trade data in China. The Chinese economy continues to grow at a tremendous pace, and in 2012, the Asian giant surpassed the US to become the world’s biggest trading nation, as measured by total exports and imports. US exports and imports totaled $3.83 trillion, and for the first time, China beat that figure, with total trade worth $3.87 billion. This development will surely have profound economic and political implications for both China and its trading partners. Prime Minister Steven Harper has made trade with Asia a priority, and economic releases out of China could have a substantial impact on USD/CAD.

 

USD/CAD for Monday, February 11, 2013

Forex Rate Graph Monday, February 11, 2013

USD/CAD at 15:35 GMT

1.0082 H: 1.0084 L: 1.0033

 

USD/CAD Technical 

 

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

 

 USD/CAD has pushed higher, and is now close to the 1.01 line. This resistance line has proven to be strong, and has remained intact since July.  Will the US dollar be able to break through? The next line on the upside is 1.0157. On the downside, 1.0041 is the next line of support. It is followed by support at 1.0003, protecting the parity line.

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 strong movement towards short positions. This is not reflected in the pair’s current movement, as the US dollar has broken above parity and is pushing close to the 1.01 line. Current movement in the ratio could signal that we are in for a reversal of the current upward trend. The ratio is now close to an even split, with trader sentiment strongly divided regarding which direction the pair will take.

The US dollar finally pushed across the parity line, and has sustained an impressive rally, as it pushes close to the 1.01 line. Will the upward movement continue? The markets have reacted negatively to weak Canadian data, and this time around, the US dollar may be able to break above the stubborn line of 1.01.

USD/CAD Fundamentals

  • 18:00 US FOMC Member Janet Yellen Speaks.
  • 21:15 Bank of Canada Deputy Governor Timothy Lane 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.

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.