USD/CAD – Loonie Moves Up after US & Canada Release Mixed Data

USD/CAD has edged lower in Thursday trading, as the pair trades just below the 1.03 line. Thursday has been busy, as both Canada and the US have published major releases. In Canada, Building Permits fell way below the estimate, but the Trade Deficit narrowed nicely. In the US, Unemployment Claims looked sharp, easily beating the forecast for the second week running. However, Trade Balance widened sharply, missing the market forecast.

On Thursday, the markets had plenty of economic data to chew on from both Canada and the US. In Canada Building Permits broke a two month slide, but still fell below the estimate. The indicator posted a modest gain of 1.7%, well  below the estimate of 5.4%. The Trade Balance deficit declined sharply, coming in at -0.2 billion. This easily beat the forecast of 0.6B. In the US, employment numbers continue to sparkle, as Unemployment Claims fell to 340 thousand,  well below the estimate of 354 thousand. However, US Trade Balance deficit widened to $44.4 billion, missing the estimate of a $42.8 billion deficit.

As expected, the ECB maintained interest rates at 0.75% on Thursday. ECB head Mario Draghi reiterated that he expected the Eurozone economy to turn the corner in 2013, but called upon bloc members to implement structural reforms to their economies. He also stated that the ECB’s “monetary policy stance will remain accommodative”. The markets clearly liked what they heard, as the euro has spiked close to one cent since the rate announcement was made.

In Japan, the BOJ had no surprises up its sleeve, and maintained interest rate and QE levels. The benchmark rate remained at 0%-0.10%, while the size of the central bank’s asset purchase remained unchanged at JPY76 trillion. This policy meeting was the final one presided by governor Masaaki Shirakawa, who will be replaced by incoming governor Haruhiko Kuroda. The new governor is a proponent of strong monetary measures to kick-start the economy, and has suggested that the central bank consider purchasing more Japanese government bonds. Some analysts feel that this could cause a market bubble, with one expert warning that the BOJ’s options are limited, and that Kuroda will face a “wall of reality” when he takes the helm of the BOJ later this month. Regarding inflation, Kuroda said that the BOJ’s current policies were not strong enough to boost inflation to the government’s target of 2%. Kuroda suggested that the BOJ consider commencing its open-ended asset purchases before the scheduled start of 2014. He took pains to note that the BOJ is not targeting the yen, which has lost 12% of its value against the dollar in the past 3 months, much to the dismay and unease of Japan’s trading partners.

 

USD/CAD for Thursday, March 7, 2013

Forex Rate Graph 21/1/13
USD/CAD March 7 at 15:00 GMT

1.0288 H: 1.0330 L: 1.0286

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0157 1.0229 1.0282 1.0361 1.0446 1.0523

 

USD/CAD has broken out narrow range trading, with the loonie posting some gains in Thursday trading. The pair is testing the support line of 1.0282. This line could break if the Canadian dollar continues to move higher. This is followed by resistance at 1.0229. On the upside, the pair faces resistance at 1.0361. This line has strengthened as the pair trades at lower levels.

  • Current range: 1.02082 to 1.0361

 

Further levels in both directions:

  • Below: 1.0282, 1.0229, 1.0157, 1.01, 1.0041, 1.00 and 0.9940
  • Above: 1.0361, 1.0446, 1.0523 and 1.0642

 

OANDA’s Open Position Ratios

The USD/CAD ratio is back in action after a rest on Wednesday. The ratio is pointing to strong movement in the direction of short positions. This is consistent with the pair’s downward trend, as the Canadian dollar is picking up some ground against the US currency.

The Canadian dollar has posted some gains in Thursday trading, but the pair is still close to the 1.03 line, as USD/CAD has enjoyed a rally over the past few weeks. Both countries will release key employment numbers on Friday, so we can expect the pair to show some movement before the weekend.

 

USD/CAD Fundamentals

  • 13:30 Canadian Building Permits. Estimate 5.4%. Actual 1.7%
  • 13:30 Canadian Trade Balance. Estimate -0.6B. Actual -0.2B
  •  13:30 US Trade Balance. Estimate -0.6B. Actual -0.2B
  • 13:30 US Unemployment Claims. Estimate 354K. Actual 340K
  • 13:30 US Revised Nonfarm Productivity. Estimate -1.6%. Actual -1.9%
  • 13:30 US Revised Unit Labor Costs. Estimate 4.4%. Actual 4.6%
  • 15:30 US Natural Gas Storage. Estimate -135B
  • 18:15 US FOMC Jerome Powell Speaks
  • 20:00 US Consumer Credit. Estimate 15.2B
  • 21:30 US Bank Stress Test Results

 

*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.