USD/CAD – Greenback Pushes Up Against Loonie

The US dollar started the week on the right foot, gaining close to one cent against the Canadian currency. The pair remains under pressure on Tuesday, trading in the low-1.02 range in the European session. Continuing weak US data is hurting the Canadian dollar, as investors opt for the safe-haven US dollar. US numbers continue to disappoint, as the Empire State Manufacturing Index looked very weak. The markets will be busy on Tuesday, with plenty of releases to review. Canada will release Manufacturing Sales, a key event, as well as Foreign Securities Purchases. In the US, there are three major releases – Building Permits, Core CPI and Housing Starts.

What is wrong with the US? The country has produced several weeks of disappointing releases, underscored by four key readings on Friday, all of which missed their estimates. After strong employment numbers on Thursday, there was hope that the US would rebound, 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 came in at 72.3 points, way off the estimate of 79.1 points. On Monday, the Empire Manufacturing Index looked sluggish, falling sharply from 9.2 points to just 3.1 points. The alarm bells may not have gone off just yet, but the continuing weak numbers are raising concerns about the extent of the US recovery. The markets will be hoping for better news from Tuesday’s numbers, as the US releases more key events. 

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. Depositors 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. Even with the bailout, the economy is in for a rough time. Analysts estimate that the country’s GDP will shrink by 13% in 2013 and 2014.

 

USD/CAD for Tuesday, April 16, 2013

Forex Rate Graph 21/1/13
USD/CAD April 16 at 11:20 GMT

1.0219 H: 1.0257 L: 1.0213

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0041 1.01 1.0157 1.0229 1.0282 1.0361

 

USD/CAD is showing some upward momentum, as the pair trades above the 1.02 line. On the downside, the pair is receiving support at 1.0157. This is followed by a support level at the round number of 1.01. On the upside, the pair is testing 1.0229. This is a weak line, and could be breached if the US shows any upward momentum. This is followed by resistance at 1.0282.

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 not showing much movement in Tuesday trading. This is in line with what we are seeing from the pair, which is trading quietly. Increased movement in the ratio could be an early sign that we can expect some action from USD/CAD. 

The US dollar has flexed some muscle against the Canadian dollar this week, in large part due to continuing weak US numbers. We could see increased movement from the pair in the North American session, as both the US and Canada release key data later today.

  • 12:30 Canadian Manufacturing Sales. Estimate 0.6% 
  • 12:30 Canadian Foreign Securities Purchases. Estimate 7.28B 
  • 12:00 US FOMC Member William Dudley Speaks
  • 12:30 US Building Permits. Estimate 0.94M
  • 12:30 US Core CPI. Estimate 0.2%
  • 12:30 US CPI. Estimate 0.0%
  • 12:30 US Housing Starts. Estimate 0.93M
  • 13:15 US Capacity Utilization Rate. Estimate 78.4%
  • 13:15 US Industrial Production. Estimate 0.3%
  • 14:00 US Treasury Secretary Jack Lew Speaks
  • 16:00 US FOMC Member Elizabeth Duke Speaks
  • 19:00 US FOMC Member Janet Yellen Speaks
  • 19:00 US Treasury Secretary Jack Lew 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.