USD/CAD – US Dollar Edges Higher after Solid Data

The US dollar has edged higher, following strong US consumer confidence and manufacturing numbers on Friday. The news was not as good across the border, as Canadian Manufacturing Sales declined sharply, posting its poorest performance since 2009. The markets are closed in the US for the Presidents Day holiday, and there are no scheduled Canadian releases today.

In the US, UoM Consumer Sentiment and the Empire State Manufacturing Index looked sharp. Consumer Sentiment rose to 76.3 points, exceeding the estimate of 74.8 points. The Manufacturing Index jumped 10 points, well above the forecast of -2.1 points. The markets were pleased with the data, as both indicators have been struggling recently. These numbers come on the heels of excellent US employment data. If US indicators continue to point to an improving US economy, we could see the US dollar push higher. In Canada, the markets were disappointed as Manufacturing Sales plunged 3.1%. The markets had expected a much milder loss, with an estimate of -0.4%. This was the indicator’s weakest showing since July 2009, and points to sluggish manufacturing sector. 

In other news, the G-20 concluded a two-day meeting on the weekend in Moscow. The talks were attended by finance ministers and central bank governors, and the final statement included a mild comment on the recent volatility in exchange rates. The leaders pledged not to “target our exchange rates for competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under fire for monetary policies which have led to free-fall in the value of the Japanese yen. G-20 leaders appear resigned to the yen continuing to slide, but do not want Japanese officials to make public statements which will pull down the currency. Thus, Japan’s major trading partners, although not pleased about the tumbling yen, have tacitly given Japan a green light to continue to stimulate its economy with further monetary easing measures and higher inflation, which will likely have a negative impact on the yen.

The IMF issued its annual report card for Canada late last week, and stated that there was further room for interest rate cuts.  The well-respected institution noted that the Canadian economy slowed in 2012, and will post under-2% growth in 2013. However, it expected GDP to rise in 2014, with exports growing due to further demand from the US later this year. The IMF also found that the Canadian dollar was overvalued between 5%-15%, and had been bolstered by high commodity prices and the country’s safe-haven status.

 

USD/CAD for Monday, February 18, 2013

Forex Rate Graph Monday, February 18, 2013

USD/CAD February 18 at 13:55 GMT

1.0076 H: 1.0080 L: 1.0067

 

S3 S2 S1 R1 R2 R3
0.9954 1.00 1.0041 1.01 1.0157 1.0286

 

USD/CAD is trading in a narrow range, in the high-1.00 range. The pair is receiving support at 1.0041. This is a weak line, and could be tested if the Canadian dollar can muster any strength. The parity line is the next support level. On the upside, the round number of 1.01 continues to provide resistance. This line has not been tested since late January, when the US dollar lost some ground and dipped below parity. It is followed by 1.0157.

  • Current range: 1.0041 to 1.01.

 

Further levels in both directions:

  • Below: 1.00, 0.9954, 0.9898, 0.9833, 0.9809 and 0.9767
  • Above: 1.0041, 1.0157, 1.0207, 1.0286.

 

OANDA’s Open Position Ratios

Although USD/CAD is trading quietly, the ratio is showing movement towards long positions. . This would indicates an expectation for the US dollar to improve further. The greenback has been unable to push across the 1.01 level in February Will it sustain enough momentum to push across this major resistance line?

With no fundamental releases out of Canada or the US, we can expect a fairly quiet day from USD/CAD. The US dollar has been pushing towards the 1.01 line, and could continue to inch higher.

 

USD/CAD Fundamentals

  • There are no scheduled releases out of Canada or the US.

 

*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.