USD/CAD – Rises after Disappointing Canadian Employment Data

The US dollar is on the move against its Canadian counterpart, as the pair pushed past the 1.01 line in Friday trading. USD/CAD dropped close to the parity line on Thursday, but rebounded after strong US employment numbers on Thursday. The US dollar has gained more ground on Friday, after Canadian Employment Change disappointed the markets. 

Canadian Employment Change rebounded nicely, after posting an awful reading of -54.5 thousand in April. The May release climbed to 12.5 thousand new jobs, but this fell short of the estimate of 14.8 thousand. This has helped USD/CAD continue its late-week rally, as the pair has pushed into 1.01 territory. The Canadian Unemployment Rate remained unchanged at 7.2%, matching the forecast.

On Thursday, the US dollar got a boost as US Unemployment Claims looked sharp. There were 323 thousand new claims, well below the estimate of 333 thousand. This was the third week in a row that Unemployment Claims has come in below expectations. This points to an improving employment picture in the US, but the markets will want to see strong numbers from other sectors of the economy to be convinced that the US is headed in the right direction.

There was some excitement in the markets, as USD/JPY dollar finally lay claim to the psychologically important 100 summit. The pair had come close a couple of times, but retracted on each occasion. It was the first time since May 2009 that the pair found itself in three digit levels. The slumping yen has made Japanese exports more competitive on world markets, which contributed to an improved Japanese Current Account release on Thursday. Japan posted a surplus of JPY 0.34 trillion. This missed the estimate of JPY 0.48 trillion, but was a sharp improvement from the previous reading of JPY 0.00 trillion. Not surprisingly, Japan’s trading partners are not happy with the weakening yen, as they struggle to keep their exports competitive. South Korea, with an export-dependent economy, cut its interest rate by 0.25% on Thursday in order to boost growth and compete with the yen. The Japanese currency has already depreciated 14% against the dollar in 2013, and with the BOJ moving full steam ahead with aggressive monetary easing, we can expect the yen to continue to point downwards.

 

USD/CAD for Friday, May 10, 2013

Forex Rate Graph 21/1/13
USD/CAD May 10 at 12:30 GMT

1.0107 H: 1.0123 L: 1.0064

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.00 1.0041 1.01 1.0157 1.0229 1.0282

 

USD/CAD has broken out of its narrow band, and pushed just above the 1.01 level. This line remains under pressure on the downside. There is stronger support at 1.0041. This line has strengthened as the pair trades at higher levels. On the upside, there is resistance at 1.0157. This is followed by resistance at 1.0229.

Current range: 1.01 to 1.0157

 

Further levels in both directions:

  • Below: 1.01, 1.0041, 1.00, 0.9930 and 98.42
  • Above: 1.0157, 1.0229, 1.0282 and 1.0337

 

OANDA’s Open Positions Ratio

USD/CAD was unchanged on Thursday, but is currently pointing to movement towards long positions. This is consistent with what we are seeing from the pair, as the US dollar is pushing higher. The ratio continues to have a solid majority of long positions, indicating that trader sentiment is strongly biased towards USD/CAD continuing to move upwards.

USD/CAD has broken out of its narrow range, as the greenback shows some muscle after strong US employment data and disappointing employment numbers out of Canada. We can expect the pair to settle down around the 1.01 line as we wrap up the trading week.

 

USD/CAD Fundamentals

  • Day 1: G7 Meetings.
  • 12:25 US FOMC Member Charles Evans Speaks.
  • 12:30 Canadian Employment Change. Estimate 14.8K. Actual 12.5K.
  • 12:30 Canadian Unemployment Rate. Estimate 7.2%. Actual 7.2%.
  • 13:30 US Fed Chairman Bernanke Speaks.
  • 18:00 US FOMC Member Esther George Speaks.
  • 18:00 US Federal Budget Balance. Estimate 108.3B.

 

*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.