USD/CAD – Loonie Edges Higher Despite Weak Canadian Data

The Canadian dollar is posting modest gains against the US currency in Tuesday trading. The pair has moved down to the 1.0150 range early in the North American session. In economic news, the Bank of Canada released its quarterly Business Outlook Survey, and the report was not very optimistic. Housing Starts beat the estimate, but Building Permits was a major disappointment. In the US, there are two minor events on Tuesday. NFIB Small Business Index missed the estimate, and Wholesale Inventories will be released later today.

The BOC released its Business Outlook Survey, and the report couldn’t hide the pessimism felt by Canadian businesses. The survey found that firms plan to reduce hiring and lower their spending, in response to a lack of confidence about economic conditions in the next 12 months. Canadian Housing Starts came in at 184 thousand, beating the estimate of 176 thousand. However, Building Permits was weak, as the key construction indicator posted a gain of 1.7% for the second straight month. This was well below the estimate of 3.7%. Over in the US, the NFIB Small Business Index fell slightly to 89.5 points, missing the forecast of 92.3 points. On Wednesday, the markets get a look at the first major US release this week, the Federal Reserve FOMC Meeting Minutes.

Meanwhile, the Japanese yen continues to drop, and USD/JPY is within striking distance of the psychologically significant 100 level. We last saw this level in April 2009. The Bank of Japan has wasted no time in implementing further easing measures. The BOJ plans to double its asset purchase program by 2015, and  made good on its promise to purchase large amounts of government bonds. This move is aimed at pushing down longer-term interest rates in order to encourage businesses to borrow and spend more in order to increase activity in the economy and eliminate inflation, which has hobbled the Japanese economy for 15 years. The BOJ began its purchase of government bonds on Monday, and said it would purchase JPY 1 trillion in 5-10 year bonds, and an additional JPY200 billion in bonds with maturities exceeding 10 years.

In the US, talk of a deepening recovery is being replaced by concerns about the direction the economy, as the US continues to post out dismal numbers. With every major release over the past two weeks failing to meet expectations, the markets are justifiably becoming increasingly anxious. The data comes from sectors throughout the economy – housing, manufacturing consumer confidence and employment releases have all missed their estimates. On Friday, Non-Farm Payrolls followed the string of dismal releases, posting its worst showing since July 2012. There were 88 thousand new jobs created, way below the estimate of 198 thousand. Will we see a turnaround in this week’s numbers? If not, we could see some volatility in the currency markets.

USD/CAD for Tuesday, April 9, 2013

1.0144 H: 1.0175 L: 1.0134

USD/CAD Technical

USD/CAD has moved lower in Tuesday trading. The pair is receiving support at the round number of 1.01. This is followed by a support level at 1.0041. This line continues to protect the parity level. On the upside, the pair faces resistance at 1.0157. This weak line could see further activity if the US dollar pushes higher. There is stronger resistance at 1.0229.

• Current range: 1.01 to 1.0157.

Further levels in both directions:

• Below: 1.01, 1.0041, 1.00 and 99.46
• Above: 1.0157, 1.0229, 1.0282, 1.0361 and 1.0446

OANDA’s Open Position Ratios

USD/CAD ratio is showing movement in the direction of short positions. This is consistent with what we are seeing from the pair currently, as the Canadian dollar posts modest gains against the US currency. We can expect the movement in the ratio to continue while the pair moves lower.

Despite some lackluster Canadian numbers, the loonie has managed to post gains against the US dollar. However, there have not been any major releases so far this week, so we could see a change in the pair’s direction if the US can turn around a long string of weak releases.

USD/CAD Fundamentals

• 11:30 US NFIB Small Business Index. Estimate 92.3points. Actual 89.5 points.
• 12:13 Canadian Housing Starts. Estimate 176K. Actual 184K.
• 12:30 Canadian Building Permits. Estimate 3.7%. Actual 1.7%.
• 14:00 US Wholesale Inventories. Estimate 0.5%.

*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.