USD/CAD – Loonie Breaks Below 1.02 Line as US Employment Data Shines

The Canadian dollar continues to improve, and USD/CAD was trading just below the 1.02 level in Friday’s European session. The loonie has posted a modest rally after coming close to the 1.03 line earlier in the week. In the US, there was some relief from the string of bad numbers, as Unemployment Claims came in below expectations. On Friday, the US will release Advance GDP and UoM Consumer Sentiment. There are no Canadian releases on Friday.

Could we see a rate cut from the ECB next week? The Eurozone continues to stagnate with poor releases, and has its hands full with crises in Cyprus (bailout fiasco) and Italy (political gridlock). Speculation that the ECB will take action is growing in the markets. Goldman Sachs released a statement on Thursday, stating that it expects a 0.25% cut when the ECB meets next week. The prestigious firm also downgraded Eurozone growth for 2013, from -0.5% to -0.7%. The ECB will set rates next Thursday, but the possibility of a rate cut will likely to preoccupy the markets during the course of the week. 

The US has been having its share of problems as well. Since late March, almost all key releases have pointed  downwards, indicating weakness in a wide range of economic sectors. On Wednesday, Core Durable Goods, a key manufacturing event, declined by 1.4%, well below the estimate of a 0.5% gain. There was better news on Thursday, as Unemployment Claims dropped to 339 thousand, beating the estimate of 352 thousand. However, the markets remain concerned about the pace and  extent of the US recovery, and will want to see additional releases pointing upwards.

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. The BOC does not meet again to set interest rate levels until the end of May.

USD/CAD for Friday, April 26, 2013

1.0196 H: 1.0206 L: 10182

USD/CAD Technical

USD/CAD has edged lower in Friday trading, and crossed below the 1.02 in the Asian session. The pair continues to receive support at 1.0157. This is followed by a support level at the round number of 1.01. On the upside, the pair faces resistance at 1.0229. This line could face pressure if the US dollar shows any strength. There is stronger resistance at 1.0282.

Further levels in both directions:

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

OANDA’s Open Position Ratios

USD/CAD ha shown very little movement this week, and this trend has continued on Friday. This lack of movement is reflected in the pair, which is trading quietly, close to the 1.02 line. Traders should continue to monitor the ratio for any movement, as this could be a sign that the pair will become more active. 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 gone very quiet, although the pair continues to test the 1.02 level. We could see the narrow range trading continue during the day. However, the US is releasing Advance GDP later today, and this key event should be treated as a market-mover. If the reading catches the market by surprise, we could see a reaction from USD/CAD.

USD/CAD Fundamentals

• 12:30 US Advance GDP. Estimate. 3.1%.
• 12:30 US Advance GDP Price Index. Estimate. 1.3%.
• 13:55 US Revised UoM Consumer Sentiment. Estimate 73.3 points
• 13:55 US Revised UoM Inflation Expectations.

*Key releases are highlighted in bold

*All release times are GMT

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