USD/CAD – Loonie Under Pressure After Mixed Canadian Numbers

USD/CAD is showing some movement after Canada released key inflation and retail sales data on Friday. The pair is trading in the mid-1.09 range early in the North American session. In economic news, Canadian Core CPI posted a decline of 0.1%, while Core Retail Sales jumped sharply, with a gain of 1.5%. There are no releases out of the US on Friday. The markets will be closely monitoring the symposium in Jackson Hole, Wyoming, with Federal Reserve Chair Janet Yellen addressing the meeting later in the day.

Canada continues to suffer from persistently low inflation, so weak CPI numbers on Friday were not a surprise. Core CPI, a key indicator, posted its second straight decline, coming in at -0.1%. This was shy of the estimate of +0.1%. CPI also declined last month, with a reading of -0.2%, which edged lower than the estimate of -0.1%. It was a different story with retail sales, which were outstanding in July. Core Retail Sales, the primary gauge of consumer spending, surprised with a 1.5% jump, its best showing in more than four years. This easily beat the estimate of 0.4%. Similarly, Retail Sales gained 1.1%, crushing the estimate of 0.3%. The Canadian dollar showed some downward movement after these releases, and we could see further activity from the currency during the North American session.

Financial leaders and central bankers from around the world have gathered in picturesque Jackson Hole, Wyoming. This is Janet Yellen’s first appearance as Fed chair at the conference, and she will deliver a keynote speech on Friday. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference’s usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. Traders should therefore be prepared for some movement from USD/CAD during the day.

US releases wrapped up the week on a high note. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday’s other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we’ve since September 2013. What is particularly encouraging is that the data stems from a wide range of sectors, which points to balanced economic growth.

In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game as to a rate hike will only intensify. Will Janet Yellen provide some clues when she speaks in Jackson Hole?

USD/CAD for Friday, August 22, 2014

USD/CAD August 22 at 13:00 GMT

USD/CAD 1.0947 H: 1.0979 L: 1.0945

USD/CAD Technical

• USD/CAD edged lower in the Asian session but then reversed course. The pair climbed to a high of 1.0979 in the European session before retracting.
• On the upside, 1.0961 is under strong pressure and was briefly breached earlier. 1.1004 is next.
• 1.0852 is providing strong support.
• 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 slight gains in long positions in Friday trade, reversing the direction seen a day earlier. This is consistent with the pair’s current movement, as the  US dollar has made small gains. The ratio is split almost evenly between short and long positions, indicating a lack of trader bias as to the direction that the pair will take.

USD/CAD Fundamentals

• Day 2 – Jackson Hole Symposium.
• 12:30 Canadian Core CPI. Estimate 0.1%. Actual  -0.1%.
• 12:30 Canadian Core Retail Sales. Estimate 0.4%. Actual 1.5%.
• 12:30 Canadian CPI. Estimate -0.1%. Actual -0.2%
• 12:30 Canadian Retail Sales. Estimate 0.3%. Actual 1.1%.
• 14:00 US Federal Reserve Chair Janet Yellen Speaks at Jackson Hole.

* 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.