USD/CAD – Canadian Dollar Steady As Markets Eye Debt Ceiling Deadlock

USD/CAD has edged lower as we start the new trading week. The pair is trading in the mid-1.03 range in the North American session. There are no Canadian or US releases on Monday, as the markets in both countries are closed for a holiday. In Washington, negotiations over the weekend failed to produce an agreement to raise the debt ceiling, as the prospect of a possible debt default by the United States looms larger.

Over the weekend, negotiations continued on Capitol Hill between the Republican and Democrat Senate leaders, but they failed to reach on agreement on the debt ceiling, which will be reached on Thursday. The parties have made little progress on the budget deadlock, as the government shutdown heads into its third week. A bipartisan proposal has been floated which would fund the government for six months and raise the debt limit until January 31. In the meantime, the impasse on Capitol Hill continues, and it’s hard to see how the markets can remain calm in this crisis-filled atmosphere.

The debt ceiling crisis is generating headlines the world over, as a US default on its financial obligations could lead to severe damage to the global economy. The US is being urged to get its act together, and quickly. The IMF has warned that the continuing uncertainty emanating out of Washington could lead to a world recession. ECB President Mario Draghi has also weighed in, saying that it was “unthinkable” that Congress would not reach an agreement on the debt ceiling.

QE tapering, one of the hottest topics in the markets just a few weeks ago, has quickly moved to the backburner, courtesy of the budget and debt ceiling crises which have gripped Washington. Last week, the Fed released the minutes of its September policy meeting. At that meeting, the Fed surprised the markets by not reducing its bond-purchasing program, which currently runs at $85 billion/mth. The minutes stated that the decision not to begin tapering was a “close call”. This has raised speculation that we could see tapering before the end of the year. However, the Fed is reluctant to make any major moves in the midst of the political crisis the US is currently experiencing. As well, the Fed is “data dependent”, and key releases such as Non-Farm Payrolls have been suspended to the shutdown. This makes it difficult for the Fed to get an accurate picture of the true state of the economy. The bottom line? We may not see any QE moves by the Fed before the end of the year.

 

USD/CAD for Monday, October 14, 2013

Forex Rate Graph 21/1/13

USD/CAD October 14 at 14:00 GMT

USD/CAD 1.0351 H: 1.0370 L: 1.0342

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0224 1.0282 1.0337 1.0442 1.0502 1.0573

 

  • USD/CAD has posted modest losses on Monday.
  • The pair continues to face resistance at 1.0442. This is followed by a resistance line at 1.0502. This line has remained intact since early September.
  • USD/CAD is receiving support at 1.0337. This weak line could face strong pressure if he Canadian dollar continues to post gains. 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, 1.0224, 1.0158 and 1.0068
  • Above 1.0442, 1.0502, 1.0573 and 1.0652

 

OANDA’s Open Positions Ratio

USD/CAD ratio is made up of a majority of long positions, indicative of a trader bias towards the US dollar moving higher.

USD/CAD has moved lower and is trading in the mid-1.03 range. With the markets shut in both countries on Monday,  we are likely to see very limited moves by the pair, unless there is dramatic news out of Washington.

 

USD/CAD Fundamentals

  • There are no releases out of Canada or the US on Monday.

 

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.