USD/CAD – Little Movement As US Numbers Slip

USD/CAD is showing little change on Thursday, as the pair trades just shy of the 1.10 level in the North American session. In economic news, US retail sales data weakened in January, while Unemployment Claims disappointed, coming in above the estimate. In Canada, today’s sole release, New Housing Price Index posted a weak gain of 0.1%.

The markets did not have much to cheer about on Thursday as all three US key releases disappointed. Unemployment Claims rose to 337 thousand, above the estimate of 331 thousand. This reading comes on the heels of JOLTS Job Openings earlier in the week, which also missed market expectations. Core Retail Sales dropped to 0.0%, a nine-month low. The estimate stood at 0.1%. Retail Sales brought no relief, slipping to -0.4%, short of the estimate of 0.0%. Will the US dollar take a hit after these dismal releases?

Canadian inflation indicators continue to sputter, as New Housing Price Index posted a weak gain of 0.1%. Earlier this week, Canadian Housing Starts dropped to 180 thousand, its lowest gain since August, and fell short of the estimate. This release follows a sharp decline in Building Permits last week, pointing to trouble in the housing and construction sectors. Meanwhile, the annual federal budget didn’t contain any dramatic news, with the government taking a cautious approach to spending and taxation. Canada is expected to post a budget surplus in 2015, after a long stretch of annual deficits.

Federal Reserve chair Janet Yellen didn’t generate much excitement in the markets when she testified before Congress on Tuesday. She said that the Fed plans to continue trimming QE, provided that the employment picture continues to improve and inflation rises. She acknowledged that even though the unemployment rate has improved steadily, the recovery in the labor market is far from complete and the Fed plans to keep interest rates at ultra-low levels. Yellen, who took over as Fed chair on February 1, is expected to continue the policies of her predecessor, Bernard Bernanke.

With the US economy pointed in the right direction, the Federal Reserve has implemented two tapers of $10 billion to the QE scheme, reducing QE to $65 billion each month. We could see another taper when the Fed meets in March. Former Fed chair Bernard Bernanke took his time making the decision, and the taper train will be hard to stop, barring any unexpected downturns in the economy. The Fed plans to wind down QE in $10 billion installments, completing the process by the end of 2014.

USD/CAD for Thursday, February 13, 2014

USD/CAD February 13 at 15:40 GMT

USD/CAD 1.0994 H: 1.1025 L: 1.0976

USD/CAD Technical

• USD/CAD is steady in Thursday trading, as the pair continues to trade close to the 1.10 line.
• 1.0906 is providing support. This is followed by a support line at 1.0852, which has held firm since mid-January.
• On the upside, 1.1000, a key level is being tested. There is stronger resistance at 1.1094.
• Current range: 1.0906 to 1.1000

Further levels in both directions:

• Below: 1.0906, 1.0852, 1.0783 and 1.0706
• Above: 1.1000, 1.1094, 1.1177, 1.1319 and 1.1496

OANDA’s Open Positions Ratio

USD/CAD ratio continues to point to gains in long positions. This is not consistent with what we are seeing from the pair, which is almost unchanged. The ratio has a narrow majority of short positions, indicating a slight trader bias towards the Canadian dollar posting gains.

USD/CAD has had a very quiet Thursday, shrugging off weak US employment and retail sales numbers. The pair has edged lower early in the North American session and is trading just shy of the 1.10 line.

USD/CAD Fundamentals

• 13:30 Canadian New House Price Index. Estimate 0.2%. Actual 0.1%.
• 13:30 US Core Retail Sales. Estimate 0.1%. Actual 0.0%.
• 13:30 US Retail Sales. Estimate 0.0%. Actual -0.4%.
• 13:30 US Unemployment Claims. Estimate  331K. Actual 339K.
• 15:00 US Business Inventories. Estimate 0.4%. Actual 0.5%.
• 15:30 US Natural Gas Storage. Estimate -234B. Actual -237B.
• 18:01 US 30-year Bond Auction.

*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.