USD/CAD – Improving US Dollar Tests 1.04 Line

USD/CAD is steady as we start the new trading week. The US dollar posted sharp gains against its Canadian counterpart late last week, and is trading at highs not seen since mid-July. Early in North American trade on Monday, USD/CAD is trading just below the 1.04 line. On Friday, US Non-Farm Payrolls was a disappointment, as the key employment indicator fell short of the estimate. Taking a look at Monday’s events, it’s a very quiet start to the week, with just one event on the schedule. The US will release ISM Non-Manufacturing PMI later today. It’s a bank holiday in Canada, so the markets are closed.

With excellent numbers from ADP Non-Farm Payrolls and US Unemployment Claims last week, there were high hopes that the all-important Non-Farm Payrolls would keep pace, but this did not occur. Non-Farm Payrolls dropped sharply from 195 thousand to 162 thousand, well of the estimate of 184 thousand. The US Unemployment Rate edged down to 7.4%, its lowest level in over three years. However, this is not as important as it may seem at first glance. The reason? The participation rate in the US employment market actually dropped and is hovering just over 63%. This is a weak figure, and points to trouble in the US labor market, even with a lower unemployment rate.

The US Federal Reserve released a policy statement last week, but there was no dramatic news to shake up the markets. The Fed stated that it would continue with the present level of QE, namely $85 billion in asset purchases each month, and gave no indication about when it might taper QE. There is speculation that the Fed will press the QE trigger in September, so we could see some volatility from EUR/USD as the markets try to get a better handle on the Fed’s intentions. The Fed has said it won’t taper QE without stronger employment figures, so we can expect US employment releases to be under the market microscope.

 

USD/CAD for Monday, August 5, 2013

Forex Rate Graph 21/1/13
USD/CAD August 5 at 13:15 GMT

USD/CAD 1.0387 H: 1.0404 L: 1.0379

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0229 1.0282 1.0337 1.0442 1.0502 1.0573

 

USD/CAD is very quiet in Monday trading. The pair crossed above the 1.04 level in the Asian session, but has since retracted. USD/CAD is facing resistance at 1.0442. This is not a strong line and face strong pressure if the greenback continues to push higher. This is followed by stronger resistance at 1.0502.

On the downside, the pair is receiving support at 1.0337. This is followed by 1.0282, which has strengthened as the pair trades at higher levels.

  • Current range: 1.0337 to 1.0442

 

Further levels in both directions:

  • Below: 1.0337,1.0282, 1.0229, 1.0157, 1.0062 and 1.00
  • Above: 1.0442, 1.0502, 1.0573, 1.0652

 

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to movement towards short positions in Monday trading. This is reflected in the pair’s current movement, as the US dollar has posted gains against the loonie. Long positions still comprise a majority of positions, indicating trader bias in favor of the US dollar continuing to move to higher ground.

USD/CAD is close to the 1.04 line as we start the new trading week. Will the pair continue to push upwards? If Monday’s US ISM Non-Manufacturing PMI is strong, we could see the greenback respond with more gains.

 

USD/CAD Fundamentals

  • 14:00 US ISM Non-Manufacturing PMI. Estimate 53.2 points.

 

*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.