USD/CAD: Steady on Mixed US Data

USD/CAD has edged higher on Thursday, as the pair trades in the mid-1.07 range early in the North American session. On the release front, US Unemployment Claims looked sharp, and the Philly Fed Manufacturing Index soared last month. However, Building Permits and Housing Starts softened in June. In Canada, Foreign Securities Purchases unexpectedly climbed to a two-year high.

US Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. At the same time, the housing sector is struggling, and Building Permits fell to 0.96 million, its lowest level since January. The markets had expected a much stronger reading, with an estimate of 1.04M. Housing Starts followed suit, coming in at 0.89 million, compared to an estimate of 1.02 million. Finally, the Philly Fed Manufacturing Index sparkled, jumping to 23.9 points, well above the estimate of 15.6 and its best showing since February 2011.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Fed’s asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

The BOC was in the spotlight on Wednesday, as the central bank maintained the benchmark interest rate at 1.00%, where it has been pegged since September 2008. Bank of Canada Governor Stephen Poloz stated that the central bank was neutral on the direction of the next rate move, which would be data-dependent. Analysts do not expect any change in rates prior to mid-2015, based on weak inflation and growth levels which continue to bog down the Canadian economy. The markets will be keeping a close eye on Core CPI, which will be released on Friday. A stronger than expected reading will fuel likely speculation about an interest rate hike and could push the loonie to higher ground. Meanwhile, Canadian Manufacturing Sales surprised with a gain of 1.7%, beating the estimate of 1.3%. It was the strongest gain we’ve seen since last August.

USD/CAD for Thursday, July 17, 2014

USD/CAD July 17 at 14:55 GMT

USD/CAD 1.0756 H: 1.0759 L: 1.0728

USD/CAD Technical

• USD/CAD showed little activity in the Asian and European sessions. The pair has edged higher in North American trade.
• On the upside, 1.0775 remains under pressure. 1.0852 is stronger.
• 1.0678 is providing strong support.
• Current range: 1.0678 to 1.0775

Further levels in both directions:

• Below: 1.0678, 1.0572, 1.0414 and 1.0271
• Above: 1.0775, 1.0852, 1.0961 and 1.1004

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions on Thursday, reversing the direction seen a day earlier. This is not consistent with the movement of the pair, as the Canadian dollar has made small gains. The ratio has a substantial majority of long positions, indicative of strong trader bias towards the US dollar gaining ground.

USD/CAD Fundamentals

• 12:30 Canadian Foreign Securities Purchases. Estimate 14.23B. Actual 21.43B.
• 12:30 US Building Permits. Estimate 1.04MK. Actual 0.96M.
• 12:30 US Unemployment Claims. Estimate 310K. Actual 302K.
• 12:30 US Housing Starts. Estimate 1.02M. Actual 0.89M.
• 14:00 US Philly Fed Manufacturing Index. Estimate 15.6 points.  Actual 23.9 points.
• 14:30 US Natural Gas Storage. Estimate 99B.

* 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.