USD/CAD – Steady after BOC Maintains Rate at 1.0%

USD/CAD is steady in Thursday trading, as the pair trades in the mid-1.02 range early in the North American session. The Bank of Canada maintained interest rate levels, and also took note of the weak Canadian economy. In the US, Unemployment Claims were slightly above the estimate, as the US continues to churn out weak numbers. The Philly Fed Manufacturing Index will be released later today. There is only one Canadian release, as BOC Governor Mark Charney speaks at an event in Washington.

There were no surprises as the BOC maintained the benchmark interest rate at 1.00%. The rate has not moved since September 2010. The BOC took note of the troubled Canadian economy, stating that a full recovery would not occur before mid-2015. The central bank lowered its GDP growth forecast from 2.0% in January to 1.5%, blaming the drop on a weak housing market and lower commodity prices. Earlier this week, the IMF released a report which lowered its forecast of Canadian growth to 1.8% this year, down from the January forecast of 2.0%. The report also downgraded its forecasts for global and US growth, and this is bound to hurt the Canadian economy, which is very dependent on exports. In turn, less demand for Canadian exports will likely hurt the Canadian dollar.

The G20 meets on Thursday in Washington, and the slumping yen will be high on the agenda. Japan’s trading partners are very unhappy about Japan’s monetary actions, which has helped make the yen much more competitive and put a dent in their exports in the process. However, the Japanese government has deflected the criticism and continues to move 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. G20 meetings often sugar coat any criticism aimed at one of their own members, but any statements about the high value of the yen could nonetheless affect the currency markets.

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. On Thursday, Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. 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.

 USD/CAD for Thursday, April 18, 2013

1.0254 H: 1.0277 L: 1.0231

USD/CAD Technical

USD/CAD is trading quietly in the mid-1.02 range.  The pair is facing resistance at 1.0282. This is followed by a resistance line at 1.0361. On the downside, there is support at 1.0229. This line could feel pressure if the US dollar loses ground. There is stronger support at 1.0157.

• Current range: 1.0229 to 1.0282

Further levels in both directions:

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

OANDA’s Open Position Ratios

USD/CAD ratio is quiet in Thursday trading. This is consistent with the subdued activity we are seeing from the pair. Traders should keep an eye on the ratio, as sudden movement could be an early sign that USD/CAD may break out from the current drifting.

The US dollar has had a good week, gaining about a cent against the loonie. The US will release key manufacturing data later in the day, and this could be a market-mover for USD/CAD.

USD/CAD Fundamentals

• 12:30 US Unemployment Claims. Estimate 349K. Actual 352K
• 14:00 US Philly Fed Manufacturing Index. Estimate 2.7 points
• 14:00 US CB Leading Index. Estimate 0.1%
• 14:30 US Natural Gas Storage. Estimate 35B
• 15:00 BOC Governor Mark Carney Speaks
• Day 1: G20 Meetings
• 16:00 US FOMC Member Sarah Bloom Raskin 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.