USD/CAD – Loonie Plummets on Weak Manufacturing Sales

USD/CAD has jumped on Tuesday, as the pair trades close to the 1.21 line in North American trade. On the release front, Canadian Manufacturing Sales posted a sharp decline of 1.4%, well below expectations. It’s a quiet day in the US, as there was just one indicator on the calendar. NAHB Housing Market Index showed little change, with a reading of 58 points for January.

Things are going from bad to worse for the Canadian currency, which continues to get hammered by the surging US dollar. USD/CAD has jumped about 140 points so far on Tuesday, as the pair trades at the 1.21 line. The last time USD/CAD was at this level was back in April of 2009. The Canadian dollar reacted sharply to a poor Manufacturing Sales report, which showed a 1.4% decline in November, well below the forecast of -0.5%. The key indicator has now posted three declines in its past four readings. Canada will release Wholesale Sales on Wednesday, and if this release follows suit with a weak reading, we could see the Canadian dollar’s slide continue.

It has been less than a week since the SNB stunned the markets by suddenly removing the cap with the euro. This resulted in the euro recording sharp losses against the Swiss franc and the US dollar. However, the markets have had to quickly change focus, as there is growing anticipation that the ECB will announce a QE package on Thursday, when the ECB meets for a crucial policy meeting. The Eurozone has been plagued by deflation and weak growth, and the SNB shocker only reinforces the belief that the ECB will finally make a move. Even if QE has been priced in, there’s no way to know the size of such a scheme, so traders could be in for plenty of volatility from EUR/USD later in the week.

USD/CAD for Tuesday, January 20, 2015

USD/CAD January 20 at 16:00 GMT

USD/CAD 1.2089 H: 1.2113 L: 1.1951

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.1723 1.1875 1.1975 1.2096 1.2190 1.2261

 

  • USD/CAD was flat in the Asian session, The pair moved higher in the European session and posted sharp gains in the North American session, breaking above resistance at 1.2096.
  • 1.2096 is a weak resistance line. This line is under strong pressure and could break during the North American session. 1.2190 is stronger.
  • 1.1975 is providing strong support as the pair trades at higher levels.
  • Current range: 1.1975 to 1.2096

Further levels in both directions:

  • Below: 1.1975, 1.1875, 1.1723, 1.1669 and 1.1580
  • Above: 1.2096, 1.2190, 1.2261 and 1.2387

 

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions on Tuesday. This is not consistent with the pair’s movement, as the pair has posted sharp gains. The ratio has a majority of short positions, indicative of trader bias towards the Canadian dollar reversing its current slide and moving to higher ground.

USD/CAD Fundamentals

  • 13:30 Canadian Manufacturing Sales. Estimate -0.5%. Actual -1.4%.
  • 15:00 US FOMC Member Jerome Powell Speaks.
  • 15:00 US NAHB Housing Market Index. Estimate 58 points. Actual 57 points.

*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.