USD/CAD – Moves Higher as US Manufacturing Data Falters

USD/CAD has moved higher in Monday trading, as the pair tests the 1.02 line early in the North American session. There was more bad news from the US, as the Empire State Manufacturing Index dropped to a three-month low. This comes on the heels of a very disappointing Friday, when four key events all failed to meet their estimates. There are on Canadian releases on Monday, but the markets will  be keeping an eye on Building Permits, which will be released on Tuesday.

The US released a host of data on Friday, and the grim news shows no sign of abating. After a solid Unemployment Claims reading on Thursday, there was hope that the US would rebound from a string of dismal releases, but the wheels fell off the cart on Friday. Core Retail Sales and Retail Sales both declined by 0.4%. PPI dropped 0.6%, and UoM Consumer Sentiment wrapped up an awful week. The key consumer indicator came in at 72.3 points, way off the estimate of 79.1 points. There was no relief on Monday, as the Empire State Manufacturing Index dropped from 9.2 points to 3.1 points. This was well below the estimate of 7.2 points. The continuing weak numbers are bound to raise serious concerns about the extent of the recovery, as the US has churned out weak numbers since late March. 

The Cyprus bailout agreement has been signed, but is the crisis really over? Eurogroup finance ministers met last Friday and approved a EUR 10 billion loan to Cyprus. Under the agreement, Cyprus will have to kick in EUR13 billion. Back in March, Cyprus was only supposed to add another EUR 7 billion. However, the deal collapsed after Cyprus balked at taxing every bank deposit in the country following a huge outcry on the island. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while depositors in Laiki Bank could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will shrink by 13% in 2013 and 2014.

USD/CAD for Monday, April 15, 2013

1.0197 H: 1.0226 L: 1.0134

USD/CAD is showing some upward momentum, and briefly pushed above 1.02 in the European session. The pair is facing resistance at 1.0229. This is a weak line, and could be tested if the pair continues to move higher. The next line of resistance is 1.0282. On the downside, there is support at 1.0157. This is followed by support 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 and 99.46
• Above: 1.0229, 1.0282, 1.0361 and 1.0446

OANDA’s Open Position Ratios

USD/CAD ratio is pointing to movement towards short positions. We are not seeing this movement reflected in the pair, as the US dollar has posted gains today against the Canadian currency. However, the activity in the ratio could be an early indicator that the loonie will recover, and there will be a correction to the current upward trend. Short positions continue to compromise a substantial majority of open positions in the ratio.

The US dollar is flexing some muscle, and is testing the 1.02 line for the first time since early April. Weak US data is hurting the loonie, as nervous investors stick with the safe-haven US dollar. We could have further volatility on Tuesday, as both Canada and the US release major events.

• 12:30 US Empire State Manufacturing Index. Estimate 7.2 points
• 13:00 US TIC Long-Term Purchases. Estimate 41.3B.
• 14:00 US NAHB Housing Market Index. Estimate 45 points

*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.