USD/CAD – Higher Ahead of BOC Rate Announcement

The US dollar continues to gain ground on its Canadian counterpart as USD/CAD was trading in the mid-1.02 range early in the North American session on Wednesday. The markets are awaiting the Bank of Canada interest rate announcement and monetary policy report later today. South of the border, the US continues to churn out weak numbers, as Building Permits and Core CPI failed to match the estimates.

In the US, the picture is not a pretty one, as a long streak of weak economic numbers, dating back to March, continues. Building Permits dropped from 0.95 million to 0.90 million, missing the forecast of 0.94 million. Core CPI posted a weak gain of 0.1%, falling below the estimate of 0.2%. There was better news from US Housing Starts, which hit a multi-year high, improving to 1.04 million. The estimate stood at 0.93 million. The weak data points to trouble in the US economy, and if the streak continues, is bound to raise red flags in the markets about the extent of the US recovery.

The G20 Meeting will start on Thursday in Washington, and the slumping yen will be high on the agenda as finance ministers and central bankers huddle together. Japan’s trading partners are very unhappy about Japan’s monetary actions, which has made the yen much more competitive and hurt their exports. However, the Japanese government has moved full steam ahead with aggressive easing steps, which it says are aimed at stamping out deflation, not manipulating the value of the yen. The yen has now slid 15% against the US dollar in 2013, and last week came very close to the psychologically significant 100 level.

Over in Europe, the Cyprus bailout crisis, which rattled markets worldwide, may not be in the headlines lately, but the crisis is by no means behind us. Last month, the EU and IMF agreed to provide EUR 10 billion, with Cyprus kicking in another EUR 7 billion. However, the original deal collapsed after Cyprus balked at taxing every bank deposit in the country, following a huge outcry on the island. The bailout has now ballooned to EUR 23 billion, with Cyprus agreeing to pay EUR 13 billion. The country plans to raise these funds through a combination of taxes on uninsured depositors, tax hikes and spending cuts. 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 those in Laiki Bank, which will be winded down, 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 be slashed by 13% in 2013 and 2014, and steering the economy through choppy waters promises to be a serious challenge to the Cypriot government.

 

USD/CAD for Wednesday, April 17, 2013

Forex Rate Graph 21/1/13
USD/CAD April 17 at 13:30 GMT

1.0217 H: 1.0264 L: 1.0217

 

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

 

USD/CAD continues to push higher in Wednesday trading. The pair is facing weak resistance at 1.0229. This line could break if the US dollar can continue the upward trend. There is stronger resistance at 1.0282. On the downside, 1.0157 is providing support. This line has strengthened as the pair trades at higher levels. The next line 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 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 long positions. This is consistent with the current movement of the pair, as the US dollar continues to move higher. Long positions still maintain a comfortable majority in the ratio, which is indicative of a strong bias towards the US continuing to post gains against the Canadian currency.

The US dollar is enjoying a good week, and has gained over one cent against the loonie. The BOC will likely leave interest rates alone, but if the markets don’t like what they hear from the BOC later today, we could see the US dollar post further gains.

USD/CAD Fundamentals

  • 13:30 US FOMC Member James Bullard Speaks
  • 14:00 Bank of Canada Monetary Policy Report
  • 14:00 Bank of Canada Rate Statement
  • 14:00 Bank of Canada Overnight Rate. Estimate 1.00%
  • 14:30 US Crude Oil Inventories. Estimate 1.2M
  • 15:15 Bank of Canada Press Conference
  • 16:00 US FOMC Member Eric Rosengren Speaks
  • 18:00 US Beige Book
  • 20:00 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.