USD/CAD: Loonie Firm as Key Canadian Data Mixed

USD/CAD has posted modest gains on Friday, as the pair trades just above the 1.07 line late in the European session. The Canadian dollar picked up ground as Wholesale Sales jumped 2.2%. However, Core CPI declined by 0.1%, its worst showing in 2014. In the US, Friday’s highlight is Preliminary UoM Consumer Sentiment, with the markets expecting a strong reading.

The Canadian dollar is showing some movement on Friday, so the pair could be active in the North American session. Wholesale Sales gained 2.2%, crushing the estimate of 0.7%. This was the indicator’s sharpest rise since last June. The news was much worse from Core CPI. The key inflation index came in at -0.1%, marking a seven-month low. This did, however, match the forecast. CPI posted a weak gain of 0.1%, also matching expectations. However, the indicator slipped badly from the previous release of 0.5%.

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.

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.

 

USD/CAD for Friday, July 18, 2014

USD/CAD July 18 at 13:55 GMT

USD/CAD 1.0727 H: 1.0763 L: 1.0709

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0414 1.0572 1.0678 1.0775 1.0852 1.0961

 

  • USD/CAD edged lower in the Asian session. The pair has posted further losses in the European session and touched a low of 1.0709.
  • On the upside, 1.0775 has some breathing room as the pair trades closer to the 1.07 line. 1.0852 is stronger.
  • 1.0678 has weakened in support. Will the pair break below this barrier?
  • 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 Friday. This is consistent with the movement of the pair, as the Canadian dollar has made gains. The ratio has a substantial majority of long positions, indicative of strong trader bias towards the US dollar reversing direction and gaining ground.

 

USD/CAD Fundamentals

  • 12:30 Canadian Core CPI. Estimate -0.1%. Actual -0.1%.
  • 12:30 Canadian Wholesale Sales. Estimate +0.7%. Actual +2.2%.
  • 12:30 Canadian CPI. Estimate +0.1%. Actual +0.1%.
  • 13:55 US Preliminary UoM Consumer Sentiment. Estimate 83.5 points.
  • 13:55 US Preliminary UoM Inflation Expectations.
  • 14:00 US CB Leading Index.  Estimate 0.6%.

* 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.