USD/CAD is almost unchanged to start at the start of the trading week. The pair was trading in the mid-1.01 range early in Monday’s North American session. In economic news, US Pending Home Sales looked sharp, beating the estimate. There are no Canadian releases on Monday, but the markets will be keeping a close eye as Canada releases GDP on Tuesday.
After weeks of a political deadlock, Italy has finally formed a government. The impasse, which had paralyzed the Eurozone’s third largest economy and had kept the markets jittery, was broken as Enrico Letta was nominated as prime minister last week. Letta’s Democratic Party does not have a parliamentary majority, so the coalition he has cobbled together may not last for long. Letta is considered a moderate and is liked within the Eurozone. The new government will be faced with an economy mired in recession and a sour electorate that is fed up with austerity measures. However, the markets were pleased that there is finally a government in place.
Will we see a rate cut from the ECB later this 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. Goldman Sachs released a statement on Thursday, stating that it expects a 0.25% cut when the ECB meets this week. The prestigious firm also downgraded Eurozone growth for 2013, from -0.5% to -0.7%. The ECB will set rates on Thursday, but the possibility of a rate cut will likely to preoccupy the markets during the course of the week.
There was finally some good news out of the US, as Pending Home Sales beat expectations. The key housing indicator bounced back from a decline last week, and posted a gain of 1.5%. The estimate stood at 1.1%. The markets were pleased, especially following the disappointing US GDP on Friday. With a long string of weak releases for the past month, the GDP reading appeared to underscore the recent disappointing data. The key indicator improved sharply, climbing from -0.1% to 2.5%. However, the markets had anticipated a gain of 3.1%. The weaker than expected reading from one of the most important economic indicators should serve as a wakeup call that the US economy is hitting turbulence, which could affect the US dollar.
USD/CAD for Monday, April 29, 2013
1.0169 H: 1.0148 L: 10133
USD/CAD is trading in a narrow range in Monday trading. The pair is putting pressure on the support line of 1.0157. We could see this line fall if the Canadian dollar shows any strength. There is stronger support at the round number of 1.01. On the upside, the pair is facing resistance at 1.0229. This is followed by a resistance line at 1.0282.
Further levels in both directions:
- Below: 1.0157, 1.01, 1.0041 and 1.00
- Above: 1.0229, 1.0282, 1.0361 and 1.0446
OANDA’s Open Position Ratios
USD/CAD is showing movement towards long positions. We are not seeing this currently from the pair, which is very quiet. However, this activity could be an early sign of a breakout by the pair in an upwards direction. The ratio is evenly split, indicating that trader sentiment is divided as to what direction the pair will take next.
USD/CAD continues to trade quietly. 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.
- 12:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.0%
- 12:30 US Personal Spending. Estimate 0.2%. Actual 0.2%.
- 12:30 US Personal Income. Estimate 0.4%. Actual 0.2%.
- 14:00 US Pending Home Sales. Estimate 1.1%. Actual 1.5%.
*Key releases are highlighted in bold
*All release times are GMT