USD/CAD – Steady after Bernanke Testimony Cools QE Expectations

USD/CAD is not making much noise in Thursday trading. The pair is trading in the low-1.04 range, as Fed chair Bernanke continues his testimony on Capitol Hill. In economic releases, US Unemployment Claims looked sharp, coming in well below the estimate. The markets are waiting for the release of another key event, Philly Fed Manufacturing Index. Across the border there was good news, as Canadian Wholesale Sales jumped to a multi-year high.

There was plenty of anticipation ahead of US Federal Reserve chair Bernard Bernanke’s testimony in Washington on Wednesday, but anyone hoping for drama out of Capitol Hill was sorely disappointed. In his testimony, Bernanke basically served the same menu we’ve seen before with regard to QE. The Fed chief sounded extremely vague when he stated that the Fed bond-buying was “not on a preset course”, leaving the Fed plenty of wiggle room to scale down QE should it choose to do so. Bernanke reiterated that any decision to scale down QE would depend on improving economic conditions. He noted that present unemployment levels (7.6%) were “well above” normal levels, and was careful not to be pinned down by any deadlines for scaling down QE. So the message from the Fed to the markets seems to be that QE tapering is not on the table before the economy improves and unemployment falls. Bernanke will continue his testimony before a Senate committee on Thursday, and it’s unlikely we’ll hear anything new. The markets reacted cautiously to the first part of Bernanke’s testimony, as the US dollar posted modest gains against the major currencies.

In Canada, Stephen Poloz presided over his first policy meeting as governor of the Bank of Canada. At the meeting, the BOC kept its key interest rate pegged at 1.00%, as widely expected. Poloz noted that the economy continues to underperform and the forecast for inflation remains low. This dovish assessment weakened the Canadian dollar, as the BOC appears unlikely to reduce rates in the near future. Poloz is considered more dovish than his predecessor, Mark Carney, who is the new governor of the BOE. Meanwhile, the BOC upgraded its forecast for growth in 2013 to 1.8 percent, up from an April forecast of 1.5 percent. At the same time, the central bank lowered the 2014 prediction to 2.7 % from 2.8%. In today’s only Canadian release, Wholesale Sales looked very sharp, jumping 2.6%. This crushed the estimate of 0.4%, and marked the key indicator’s sharpest rise since March 2010. Canadian releases will have to keep pace or surpass US data if the Canadian dollar is to improve against its US counterpart.

USD/CAD for Thursday, July 18, 2013

USD/CAD 1.0410 H: 1.0439 L: 1.0402

USD/CAD Technical

USD/CAD is steady in Thursday trading. The pair has made some attempts to push further into 1.04 territory, but has not been able to maintain any upward momentum.  USD/CAD continues to face resistance at 1.0442. This is an important line, and if it breaks, we could see the 1.05 level come under pressure. This is followed by resistance at 1.0502. On the downside, 1.0337 continues to provide support. This line has strengthened as the pair trades at higher levels. This is followed by a support level at 1.0282.

• Current range: 1.0337 to 1.0442

Further levels in both directions:

• Below: 1.0337, 1.0282, 1.0229 and 1.0157
• Above: 1.0442, 1.0502, 1.0573, 1.0652, 1.0705 and 1.0780

OANDA’s Open Positions Ratio

USD/CAD ratio continues to be subdued, and is unchanged in Thursday trading. This is reflected in the pair, which is trading quietly. Short positions continue to make up a majority of the open positions, indicating a slight trader bias towards the loonie breaking out and moving upwards.

USD/CAD continues to test the 1.04 level, unable to sustain momentum in either direction. With the US releasing key manufacturing data later in the day, we could see some movement from the pair, if this reading catches the markets by surprise.

USD/CAD Fundamentals

• 12:30 Canadian Wholesale Sales. Estimate 0.4%. Actual 2.3%.
• 12:30 US Unemployment Claims. Estimate 344K. Actual 334K.
• 14:00 US Philly Fed Manufacturing Index. Estimate 8.5 points.
• 14:00 US CB Leading Index. Estimate 0.3%.
• 14:30 US Fed Chairman Bernard Bernanke Speaks. Bernanke will testify before the Senate Banking Committee in Washington.
• 14:30 US Natural Gas Storage. Estimate 63B.

*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.