USD/CAD – Struggling Loonie Ends 2014 at 4½ year Low

The Canadian dollar showed little change on the final trading day of the year, as USD/CAD closed slightly above the 1.16 line on Wednesday. Canadian and US markets are closed on Thursday for the New Year’s holiday. Both markets will resume action on Friday, highlighted by the release of US ISM Manufacturing PMI.

US releases were a mix on the last day of 2014. Unemployment Claims surprised with a sharp rise, coming in at 298 thousand, compared with 280 thousand in the previous reading. The estimate stood at 287 thousand. On the housing front, Pending Home Sales bounced back from a decline in the previous reading, posting a gain of 0.8% in December. This beat the forecast of 0.6%. The news was not as good from Chicago PMI, which dropped to 58.3 points, its worst showing since June. The reading fell short of the estimate of 60.2 points.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 points a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched by analysts, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

In contrast to the rosy picture in the US, the Canadian economy could be in for some turbulence in early 2015. As a major oil exporter, falling oil prices have taken a big bite out of government revenues and impeded the economic recovery. The Canadian consumer is not in the best of moods, and a reduction in consumer spending will have a negative impact on the labor market and hurt the economy. In 2014, The Canadian dollar lost 8.7% of its value against its US counterpart and is at its lowest levels since July 2009. Tough economic conditions in 2015 could see USD/CAD move closer to the 1.20 level.

USD/CAD for Thursday, January 1, 2015

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.1414 1.1493 1.1580 1.1669 1.1723 1.1875

 

  • USD/CAD showed little change on Wednesday. The pair tested support at 1.1580 late in the European session as well as early in North American trade but closed the day above the 1.16 line.
  • 1.1580 remains a weak support line. 1.1493 is stronger.
  • 1.1669 is an immediate resistance line. 1.1723 is next.
  • Current range: 1.1580 to 1.1669

Further levels in both directions:

  • Below: 1.1580, 1.1493, 1.1414, 1.1278 and 1.1124
  • Above: 1.1669, 1.1723, 1.1875 and 1.1975

 

OANDA’s Open Positions Ratio

USD/CAD ratio has a majority of short positions, indicative of trader bias towards the Canadian dollar moving to higher ground.

USD/CAD Fundamentals

  • There are no Canadian or US releases on Thursday.

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.