USD/CAD – Stable Ahead of Key US Inflation Data

USD/CAD is trading quietly on Monday, as the pair stays close to the 1.09 line in the North American session. On the release front, there is only one US event on Monday, as NAHB Housing Market Index climbed to 55 points, its highest level in 2014. Canadian releases started off the week on a sour note, as Foreign Securities Purchases posted a decline in July. On Tuesday, we’ll get a look at US CPI and Core CPI, both market-movers.

The Canadian dollar held its own last week, helped by Canadian Manufacturing Sales, a key event. The indicator posted a gain of 0.6%, edging above the estimate of 0.5%. On Monday, Foreign Securities Purchases came in at $-1.07 billion, the first decline since April. This was nowhere near the estimate of $14.68 billion. This indicator is closely linked to currency demand, as foreigners must purchase Canadian dollars in order to purchase Canadian securities. So, a release well below expectations can weigh on the Canadian dollar.

With the US continuing to suffer from low inflation levels, markets expectations have been low for key inflation indicators. On Friday, PPI, the primary gauge of inflation in the manufacturing sector, slipped to 0.1%, down from 0.4% a month earlier. This matched the estimate. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. On the manufacturing front, the Empire State Manufacturing Index plunged to 14.3 points, down from 23.6 points in the previous release. This marked a three-month low and was well off the estimate of 20.3 points.

On Thursday, US Unemployment Claims came in higher than expected. The indicator climbed to 311 thousand, marking a six-week high. The estimate stood at 307 thousand. Employment indicators are being closely scrutinized by analysts, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate increase is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a move by the Fed. Earlier in the week, JOLTS Job Openings hit its highest level in 13 years, although it too missed expectations.

USD/CAD for Monday, August 18, 2014

USD/CAD August 18 at 14:30 GMT

USD/CAD 1.0890 H: 1.0899 L: 1.0876

USD/CAD Technical

• USD/CAD edged lower in the Asian session but recovered. The European and North American sessions have been uneventful.
• 1.0961 is the next resistance line. 1.1004 is next.
• 1.0852 is providing support. 1.0775 follows.
• Current range: 1.0852 to 1.0961

Further levels in both directions:

• Below: 1.0852, 1.0775, 1.0678 and 1.0588
• Above: 1.0961, 1.1004, 1.1124 and 1.1278

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in long positions in Monday trade. This is not consistent with the pair’s movement, as the Canadian dollar has posted small gains. The ratio is currently evenly split between long and short positions, indicative of a lack of trader bias as to which direction to expect from the pair.

USD/CAD Fundamentals

• 12:30 Canadian Foreign Securities Purchases. Estimate 14.68B. Actual -1.07B.
• 14:00 US NAHB Housing Market Index. Estimate 53 points.

* Key releases are in highlighted 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.