USD/CAD – Edges Higher After Disappointing US Data

The US dollar has edged upwards against the Canadian dollar, and the pair is testing the 1.02 line in Friday’s European session. This follows some disappointing employment and manufacturing numbers out of the US on Thursday. Canadian releases will be in the spotlight on Friday, with the release of Core CPI and Core Retail Sales, each of which is considered a market-mover. After a very busy Thursday, the only US releases on the schedule are speeches by two members of the Federal Reserve.

Earlier in the week, 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, and the Unemployment Rate remains close to 8.0%. The Fed appears to have used up any tricks it may have had in its pocket, and will have to show patience and hope that the US recovery gains more traction.

The markets were not impressed with key US releases on Thursday. Unemployment Claims shot up to 362 thousand, well above the estimate of 353 thousand. The Philly Fed Manufacturing Index looked awful, plunging to -12.5 points, its worst showing since July 2012. The markets had expected the index to move into positive territory, with a forecast of 1.1 points. Existing Home Sales beat the forecast of 4.89 million, with a reading of 4.92 million. This was in contrast to the Housing Starts reading earlier in the week, which came in below the estimate. PPI rose a modest 0.2%, below the forecast of a 0.3% gain. On the whole, US releases looked weak, as the markets continue to ponder in which direction the US economy is headed. US economic indicators continue to present a confusing picture, with the economy appearing to take one step forward, and then another back, making the extent of the US recovery difficult to gauge.

 

USD/CAD for Friday, Feb 22, 2013

Forex Rate Graph 22/2/13

USD/CAD Feb 22 at 11:50 GMT

1.0193 H: 1.0198 L: 1.0160

 

S3 S2 S1 R1 R2 R3
1.0041 1.01 1.0157 1.0229 1.0302 1.0446

 

USD/CAD continues to test the 1.02 line, which it briefly breached on Thursday. The pair is facing resistance at 1.0229, which has held firm since last July. This is followed by the resistance line of 1.0302. On the downside, there is support at 1.0157 which saw activity earlier in the week as the US dollar posted gains. The next level of support is at 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, 1.05 and 1.0642.

 

OANDA’s Open Position Ratios

The USD/CAD is continuing where it left off on Thursday, pointing to strong movement towards short positions. We are not seeing this reflected in the pair’s current movement, as the US dollar continues to move upwards against its Canadian cousin. With a majority of open positions being short, and the current activity in the ratio, trader sentiment remains biased towards the Canadian dollar rebounding from its recent losses.

The US dollar has had a positive week, making slow but steady progress against the loonie. USD/CAD is currently testing the 1.02 line, a level not seen since last July? Will the upward push continue? Canadian data released earlier in the week was did not impress the markets, and if today’s key releases fall below expectations, we could see the US dollar push into 1.02 territory.

 

Fundamentals

  • 13:30 Canadian Core CPI. Estimate 0.2%.
  • 13:30 Canadian Core Retail Sales. Estimate 0.1%.
  • 13:30 Canadian CPI. Estimate 0.3%.
  • 13:30 Canadian Retail Sales. Estimate -0.3%.
  • 15:30 US FOMC Jerome Powell Speaks.
  • 23:30 US FOMC Daniel Tarullo 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.