USD/CAD – Steady as US New Home Sales Softens

USD/CAD is trading quietly on Monday, as the pair is trades in the mid-1.09 range in the North American session. In economic news, it’s a quiet start to the week. US New Home Sales slipped to 412 thousand, well below the estimate. There are no Canadian releases on Monday.

The week started off on a disappointing note, as the US New Home Sales dropped to 412 thousand, down from 422 thousand a month earlier (the latter figure was revised from 406 thousand). This was well off the estimate of 426 thousand. There was stronger housing data last week, as Housing Starts hit an 8-month high. We’ll get another look at key housing numbers on Thursday, with the release of Pending Home Sales.

Financial leaders and central bankers met at Jackson Hole for a conference, and the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is a divergence in monetary stance between the ECB and the Fed, as the Fed is winding up QE, while the ECB may be forced to provide stimulus to the prop up the sagging Eurozone economy.

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.

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.

USD/CAD for Monday, August 25, 2014

USD/CAD August 25 at 15:40 GMT

USD/CAD 1.0974 H: 1.0978 L: 1.0943

USD/CAD Technical

• USD/CAD lost ground in the Asian session but then reversed course and recovered these losses in European trade. The pair is steady in the North American session.
• On the upside, 1.1004 is the next resistance line. 1.1124 is stronger.
• 1.0961 has reverted to a support role and is an immediate support line. The next support line is 1.0852.
• Current range: 1.0961 to 1.1004

Further levels in both directions:

• Below: 1.0961, 1.0852, 1.0775 and 1.0678
• Above: 1.1004, 1.1124, 1.1278 and 1.1414

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to slight gains in long positions in Monday trade.  This is consistent with the pair’s current movement, as the US dollar has made small gains. The ratio is split evenly between short and long positions, indicating a lack of trader bias as to the direction that the pair will take.

USD/CAD Fundamentals

• 13:45 US Flash Services PMI. Estimate 59.2 points. Actual 58.5 points.
• 14:00 US New Home Sales. Estimate 412K. Actual 426K.

* 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.