USD/CAD is showing very little movement in the Friday session, as the pair trades quietly in the mid-1.02 range. The pair shrugged off Thursday’s release of key employment and manufacturing numbers out of the US, but the story could change on Friday. Canada will release Core CPI, a key event, as well as CPI and Wholesale Sales. There are no economic releases out of the US on Friday. The G20 meeting wraps up on Friday in Washington, and the issue of currency devaluation was one of topics on the agenda.
For those market watchers who were counting on a turnaround from US releases, this week was a major disappointment, as the US continues to churn out weak economic numbers. Thursday saw more key releases and more bad news, as employment and manufacturing numbers disappointed. Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. The Philly Fed Manufacturing Index dropped from 2.0 points to 1.3 points, nowhere near the estimate of 2.7 points. The weak numbers have dogged the US since March, and are raising red flags about the extent of the US recovery.
The markets are keeping a close eye on the two-day G20 meeting in Washington, which wraps up on Friday. Prior to the meeting, US Treasury Secretary Jack Lew warned against currency devaluations, singling out China. The US is also concerned about stagnation in the Eurozone, and is urging Germany to take steps to help the Eurozone’s weaker members in Southern Europe, such as Spain, Cyprus and Greece. The slumping yen is also a hot topic, as many of Japan’s trading partners have seen their exports take a hit due to a weaker yen, which has plummeted against the euro and the US dollar. Given this context, it is a bit surprising that Japan’s finance minister, Taro Aso, stated that the G2o accepted Japan’s view that its aggressive monetary easing is aimed at stamping out deflation, rather than an attempt to weaken the yen and make it more competitive. We’ll have to wait and see if the final communiqué from the G20 runs along the same lines as Aso’s statement.
There were no surprises as the BOC maintained the benchmark interest rate at 1.00% earlier this week. 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.
USD/CAD for Friday, April 19, 2013
1.0232 H: 1.0245 L: 1.0232
USD/CAD is very quiet in Friday trading. On the downside, the pair is testing 1.0229. This line could see break if the loonie can muster any strength. There is stronger support at 1.0157. On the upside, 1.0282 is providing resistance. This is followed by a resistance line at 1.0361.
- Current range: 1.0229 to 1.0361
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 continues to show little movement. This is consistent with what we are seeing from the pair, which is trading very quietly. 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 gained about a cent on the week at the expense of the loonie. With several releases due out of Canada later on Friday, we could see some volatility from USD/CAD before the trading week is over.
- 12:30 Canadian Core CPI. Estimate 0.2%
- 12:30 Canadian CPI. Estimate 0.3%
- 12:30 Canadian Wholesale Sales. Estimate 0.4%
- Day 1 – IMF Meetings
- Day 2 – G20 Meetings
- 16:00 US FOMC Member Jeremy Stein Speaks
*Key releases are highlighted in bold
*All release times are GMT