USD/CAD – Rangebound as US Manufacturing Numbers Sink

USD/CAD continues to trade in the mid-102 range early in Wednesday’s North American session. After solid housing numbers on Tuesday, there was more bad news out of the US, as Core Durable Goods Orders and Durable Goods Orders dropped sharply. In the only Canadian release today, Bank of Canada Governor Mark Carney will testify before the Standing Committee on Banking, Trade and Commerce in Ottawa.

Hopes for positive manufacturing news from the US were dashed as Core Durable Goods Orders, a key event, declined from -0.5% to -1.4%, way off the estimate of a 0.5% gain. Durable Goods Orders looked even worse. After a strong gain in March, the indicator plunged 5.7%, its steepest drop since September 2012. The markets had braced for a more modest drop of 2.9%. The weak figures underscore ongoing weakness in the US manufacturing industry. No less worrisome is the fact that since less March, almost all key releases out of the US have missed their estimates. This downtrend could hurt the US dollar against other major currencies.

The G20 meeting wrapped up in Washington, and there was little surprise that the G20 did not take Japan to task over its monetary policies, which have resulted in the yen taking a tumble. G20 final statements tend not to criticize its members, and this meeting was no exception. Although there has been a lot of criticism leveled against Japan, the G20 issued a very soft statement about currency devaluation which made no mention Japan, giving it a green light to continue its aggressive easing measures. Finance Minister Taro Aso has insisted that the measures are aimed at stamping out deflation, and the yen’s plunge is a “byproduct”. With the BOJ moving full steam ahead in its fight against deflation, traders can expect the Japanese currency to continue to weaken. This does not bode well for Canada, whose exports will have to compete with a shrinking yen, which has lost close to 20% of its value in the past 6 months.

BOC Governor Mark Carney stated in a television interview that he did not expect any increases in interest rates by the central bank before the  economy recovers and grows at a 2% clip. Carney will leave his position at the end of May, and take over as Governor of the Bank of England. Canada’s benchmark interest rate has been pegged at 1.00% since September 2010, and with the economy not performing well, we are unlikely to see any increase in interest rates in the near future.

 

USD/CAD for Wednesday, April 24, 2013

Forex Rate Graph 21/1/13
USD/CAD April 24 at 13:40 GMT

1.0262 H: 1.0273 L: 10254

 

 USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0100 1.0157 1.0229 1.0282 1.0361 1.0446

 

USD/CAD continues to trade quietly, showing very little movement in Wednesday trading. The pair is facing resistance at 1.0282. This is a weak line, and could be tested if the US dollar can muster any strength. There is stronger resistance at 1.0361, a line which has held steady since last June. The pair is receiving support at 1.0229. This is followed by a strong support level 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 showing very little movement in the Wednesday session. Traders should continue to monitor the ratio for any movement, as this could be a sign that the pair will break out of its narrow range trading. Short positions continue to dominate the ratio, indicating that trader sentiment is strongly biased towards the Canadian dollar improving against the greenback.

USD/CAD has had a quiet week, and the drifting continued on Wednesday, despite some poor manufacturing numbers out of the US. We can expect an uneventful day from the pair, which is trading in the mid-1.02 range.

USD/CAD Fundamentals

  • Bank of Canada Governor Mark Carney Speaks.
  • 12:30 US Core Durable Goods Orders. Estimate 0.5%. Actual -1.4%.
  • 12:30 US Durable Goods Orders. Estimate -2.9%. Actual -5.7%.
  • 13:30 US Treasury Secretary Jack Lew Speaks.
  • 14:30 US Crude Oil Inventories. Estimate 1.8M.

 

*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.