USD/CAD range trading continued after the announcement by the Federal Reserve Wednesday that it would implement further monetary easing, in order to help the fragile US recovery. The US dollar was broadly weaker against most major currencies following the news, but the loonie showed little movement against its bigger cousin. Under this monetary easing program, known as QE4, the Fed will purchase an additional $45 billion per month in Treasury holdings starting in January. As the Fed is currently buying $40 billion in mortgage bonds, this brings the total to some $85 billion per month.
This level is expected to continue well into 2013. The Fed is hoping that this step will bolster the US economy and lower unemployment, which remains close to 8%. Operation Twist, in which the Fed swapped short-term Treasuries for longer term U.S. government debt, will be phased out at the end of December. As well, the Fed kept the benchmark interest rate at below 0.25%, which has not changed since 2008. The Federal Reserve stated that it would keep interest rates would remain extremely low as long as inflation remained in the 2% range, and U.S. unemployment rate improved to 6.5% or less. This has raised some eyebrows in financial sectors as the Q4 appears to be an open-ended scheme – clearly, no one has a crystal ball which will reveal when the recovery will gain further traction and unemployment falls below 6.5%. In economic releases, Canadian NHPI posted a slight gain of 0.2% for the third consecutive month.
Canadian Capacity Utilization came in at 80.9%, almost identical to the forecast. There was plenty of action in the US, with four key releases. Core Retail Sales matched the estimate, posting a flat 0.0%. PPI disappointed, dropping by -0.8%. The estimate stood at -0.5%. Retail Sales gained 0.3%, slightly below the estimate of a 0.5% gain. There was more good news on the employment front, with Unemployment Claims dropping to a nine-week low of 343 thousand. This easily beat the estimate of 368K. Core CPI rebounded into positive territory, gaining a modest 0.1%.
USD/CAD for Wed, Dec 12, 2012
USD/CAD for Thur Dec 13, 2012
USD/CAD Dec 13 at 16:00 GMT
0.9825 H: 0.9849 L: 0.9840
S3 S2 S1 R1 R2 R3
0.9625 0.9767 0.9812 0.9909 1.00 1.0041
USD/CAD continues to be boxed in a narrow range. The pair continues to receive support at 0.9812. On the upside, there is resistance at 0.9909. With the pair showing little movement, both lines are holding steady.
• Current range: 0.9812 to 0.9909
Further levels in both directions:
• Below: 0.9812, 0.9767, 0.9625, 0.9526 and 0.9445.
• Above: 0.9909, 1.00, 1.0041, 1.0157 and 1.0252.
OANDA’s Open Position Ratios
The bias in favor of long positions on USD/CAD continues, as traders wait for the rangebound pair to breakout. In contrast to most of the major currencies, the loonie shrugged off the Q4 announcement by the Federal Reserve, showing little movement. If the pair continues to be rangebound, we are unlikely to see much change in the pair’s open position ratio.
The pair has had a very quiet week, and this trend continued even after news of further monetary easing in the US. Most of today’s key US data was uneventful, so the rangebound trading could continue until the end of the trading week.
• 13:30 Canadian NHPI. Estimate +0.1%. Actual +0.2%.
• 13:30 Capacity Utilization Rate. Estimate 80.6%. Actual 80.9%.
• 13:30 US Core Retail Sales. Estimate 0.0%. Actual 0.0%.
• 13:30 US PPI. Estimate -0.5%. Actual -0.8%.
• 13:30 US Retail Sales. Estimate +0.5%. Actual +0.3%.
• 13:30 US Unemployment Claims. Estimate 368K. Actual 343K.
• 13:30 US Fed Announcement.
• 13:30 US Core PPI. Estimate +0.2%. Actual +0.1%.
• 15:00 US Business Inventories. Estimate +0.4%. Actual +0.4%
• 15:50 US Natural Gas Storage. Estimate -4B. Actual -4B.
• 18:00 US 30-year Bond Auction.
*Key releases are highlighted in bold
*All release times are GMT