USD/CAD – Loonie Holds Firm Despite Sharp US Numbers

USD/CAD is not showing much movement in Tuesday trading. Early in the North American session, the pair is trading in the low-1.06 range. In economic news, key US releases looked sharp on Tuesday. Core Durable Goods jumped 1.2%, a seven-month high, while New Home Sales climbed to 464 thousand, well above the estimate. There are no Canadian releases on Tuesday.

After disappointing the markets late last week, US releases bounced back with strong numbers on Tuesday. Core Durable Goods Orders posted  a strong gain of 1.2%, its best showing since April. The key manufacturing indicator had posted four consecutive declines, so the sharp gain was welcome news. Durable Goods Orders bounced back from a  sharp decline in October with a gain of 3.5%, well above the estimate of 1.7%. New Homes Sales also impressed with a five-month high, climbing to 464 thousand. The estimate stood at 449 thousand.

Earlier in the week, Canadian GDP posted a modest gain of 0.3%, but this was more than enough to beat the estimate of 0.1%. GDP has posted three straight readings of 0.3%, and each has beaten the estimate, as the Canadian economy continues to grow at a faster pace than expected. The release boosted the Canadian dollar, which has gained over one cent since late last week. On Friday, Canadian releases were mixed. Core Retail Sales gained 0.4%, easily surpassing the estimate of 0.0%. However, inflation indicators continue to disappoint. Core CPI declined by 0.1%, shy of the estimate of a 0.1% gain.

The markets are still buzzing after last week’s announcement by the Federal Reserve that it would begin tapering its QE program by $10 billion a month, commencing in January. This will reduce the Fed’s asset purchases to $75 billion every month, comprised of $40 billion in Treasuries and $35 billion in mortgage bonds. The announcement came as somewhat of a surprise, as most analysts had expected the Fed to hold off on any QE reductions until early next year. The US dollar was broadly stronger after the news and USD/CAD pushed above the 1.07 level.

In its dramatic taper announcement, the Federal Reserve was careful to separate tapering from rate hike expectations. Fed chairman Bernard Bernanke stated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%. Previously, the Fed had stated that it would start to consider rate increases when unemployment fell below this level. Bottom line? With the unemployment rate at 7.0%, it could be a while before we see higher interest rates in the US.

 

USD/CAD for Tuesday, December 24, 2013

Forex Rate Graph 21/1/13

USD/CAD December 24 at 15:20 GMT

USD/CAD 1.0616 H: 1.0635 L: 1.0607

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0442 1.0502 1.0573 1.0652 1.0783 1.0852

 

  • USD/CAD is showing little activity in Tuesday trading. The pair touched a low of 1.0607 in the European session.
  • On the downside, 1.0573 is providing support. It could face pressure if the loonie continues to improve. This is followed by support at 1.0502, which is protecting the 1.05 line.
  • 1.0652 is the next line of resistance. This is followed by a resistance line at 1.0783.
  • Current range: 1.0573 to 1.0652

 

Further levels in both directions:

  • Below: 1.0573, 1.0502, 1.0442 and 1.0337
  • Above 1.0652, 1.0783, 1.0852, 1.10 and 1.1094

 

OANDA’s Open Positions Ratio

USD/CAD ratio is showing little change. This is consistent with what we are seeing from the pair, which is showing very little movement. A slight majority of the open positions in the USD/CAD ratio are short, indicating a slight bias towards the Canadian dollar gaining ground against the US currency.

The Canadian dollar has shrugged off strong US releases on Tuesday, and has posted modest gains early in the North American session.

 

USD/CAD Fundamentals

  • 13:30 US Core Durable Goods Orders. Estimate 0.9%. Actual 1.2%.
  • 13:30 US Durable Goods Orders. Estimate 1.7%. Actual 3.5%.
  • 14:00 US HPI. Estimate 0.5%. Actual 0.5%.
  • 15:00 US New Home Sales. Estimate 449K. Actual 464K.
  • 15:00 US Richmond Manufacturing Index. Estimate 15 points. Actual 13 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.