The US dollar continues to make slow but steady progress against its Canadian counterpart, as USD/CAD moved higher. The pair is currently testing the 1.02 level. The markets are busy digesting key employment and inflation data out of the US. Unemployment Claims were higher than forecast, while Core CPI was within market expectations. There are two more major releases later today – US Existing Home Sales and the Philly Fed Manufacturing Index. Today’s sole Canadian release is the Bank of Canada Review, a quarterly report.
Late Wednesday, the Federal Reserve released the minutes of its most recent FOMC meeting. At the meeting, there was discussion of winding down the current round of QE due to concern about the negative effect that QE could have on the financial markets. Previously, the Fed had stated that it expected to continue with QE until unemployment dropped to 6.5%. The Fed has been purchasing a record amount of assets since December, kept its key interest rate close to zero and expanded its balance sheet to over $3 trillion, but the US economy has not responded as quickly as hoped. The markets were surprised by the change in the Fed’s stance, and the euro dropped against the US dollar.
At the recent G-20 meeting in Moscow, finance ministers and central bank governors from the world’s leading economies met, and the participants issued a statement with regard to the recent volatility in exchange rates. The G-20 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 very concerned 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. Given the importance of the export sector to the Canadian economy, the weakening yen is likely to be a major concern to Canadian politicians and businesses.
USD/CAD for Thursday, Feb 21, 2013
USD/CAD Feb 21 at 14:30 GMT
1.0188 H: 1.0201 L: 1.0166
USD/CAD continues to push higher, as the pair tests the 1.02 line. The pair is facing weak resistance at 1.0229. Given the solid momentum of the US dollar, this line could also come under pressure. There is stronger resistance at 1.0302. On the downside, there is weak support at 1.0157. This is followed by the round number of 1.01.
- Current range: 1.0157 to 1.0229.
Further levels in both directions:
- Below: 1.0157, 1.01, 1.0041, 1.00, 0.9954, 99.03 and 98.60.
- Above: 1.0229, 1.0302, 1.0446 and 1.05.
OANDA’s Open Position Ratios
USD/CAD ratio is showing movement towards short positions. We are not seeing this reflected in the currency pair, as the US dollar continues to make inroads against the loonie.
The US dollar keeps pushing higher, and the 1.02 level appears within reach. Will the upward momentum continue? We could see more volatility from the pair, as the US releases more key data later in the day.
- 13:30 US Core CPI. Estimate 0.2%.
- 13:30 US Unemployment Claims. Estimate 353K. Actual 362K.
- 13:30 US CPI. Estimate 0.1%. Actual 0.0%.
- 14:00 US Flash Manufacturing PMI. Estimate 55.6 points. Actual 55.2 points.
- 15:00 US Existing Home Sales. Estimate 4.89M.
- 15:00 US Philly Fed Manufacturing Index. Estimate 1.1 points.
- 15:00 US Mortgage Delinquencies.
- 15:00 US CB Leading Index. Estimate 0.2%.
- 15:30 US Natural Gas Storage. Estimate -119B.
- 15:30 Bank of Canada Review.
- 16:00 US Crude Oil Inventories. Estimate 1.9M.
- 17:30 US FOMC James Bullard Speaks.
*Key releases are highlighted in bold
*All release times are GMT
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