USD/CAD – Greenback Gains as ISM Non-Manufacturing PMI Improves

USD/CAD has edged higher in Tuesday trading, as the pair trades in the mid-1.04 range in the North American session. It’s a quiet day on the release front, with just two US releases, highlighted by ISM Non-Manufacturing PMI, which beat the estimate. There are no Canadian releases on Tuesday. 

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. Still, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

After a host of weak numbers, US numbers showed some improvement late last week. Unemployment Claims practically matched the forecast, and ISM Manufacturing PMI beat the estimate. With the Fed unlikely to taper QE before 2014, the QE uncertainty which was has been weighing on the dollar has eased, and we could see the US dollar move higher against the loonie.

Although the Bank of Canada maintained interest rates at 1% at its last meeting, the removal of the tightening bias, which had been in place since April 2012, indicates that the Bank is in no hurry to raise interest rates for the foreseeable future. This could result in investors searching for greener pastures outside of Canada, which could have a negative impact on the Canadian dollar, which has been struggling lately.

USD/CAD for Tuesday, November 5, 2013

USD/CAD November 5 at 15:00 GMT

USD/CAD 1.0451 H: 1.0453 L: 1.0417

USD/CAD Technical

• USD/CAD has posted losses on Tuesday and is trading in the mid-1.04 range.
• The line of 1.0442 has reverted to a support role. This is a weak line which could see further action during the day. This is followed by strong support at 1.0337.
• USD/CAD faces resistance at 1.0502. This is followed by a resistance line at 1.0573 since early July.
• Current range: 1.0442 to 1.0502

Further levels in both directions:

• Below: 1.0442, 1.0337, 1.0282, 1.0224 and 1.0158
• Above 1.0502, 1.0573, 1.0652 and 1.0837

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains by long positions in Tuesday trading. This is reflected in the current movement of the pair, as the US dollar has posted gains. A majority of the open positions in the USD/CAD ratio are short, indicating a trader bias towards the Canadian dollar reversing directions and moving higher.

The Canadian dollar has posted losses on Tuesday and remains under strong pressure from the US dollar. We could see this trend continue in the North American session, although further losses are likely to be limited in nature. 

USD/CAD Fundamentals

• 15:00 US ISM Non-Manufacturing PMI. Estimate 54.2 points. Actual 55.4 points.
• 15:00 US IBD/TIPP Economic Optimism. Estimate 41.1 points. Actual 41.4 points.

*Key releases are highlighted in bold

*All release times are GMT

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