USD/CAD is not showing much movement, as the pair trades around the 0.9870 line. The pair has been very quiet, as Wednesday trading has been uneventful so far. In Wednesday’s news, Canadian Housing Starts were up slightly and matched the estimate. It is another quiet day in the US, with only two releases – Crude Oil Inventories and the 10-year Bond Auction. There was a major development earlier on Tuesday, with an announcement that the Japanese government would purchase bonds from the European Stability Mechanism, which is the Eurozone’s bailout fund.
In the US, the markets breathed a sigh of relief last week, as the fiscal cliff agreement was reached in the US Congress. However, any celebrating would be premature, as it appears that this was just the first round of more bruising battles ahead. The hard-fought agreement, which was preceded by months of acrimony and bad blood between the Republicans and Democrats, was criticized by many analysts and economists as a deal comprised of the lowest common denominator which both sides could reluctantly compromise and agree on. However, the agreement left two critical issues for another day – the debt ceiling and spending cuts. The problem is, the clock on those issues is also winding down, as the debt ceiling will be reached in February, and action will have to be taken to avoid a default on the country’s debt. Otherwise, the real possibility of a US default will likely cause turmoil in the markets.
As we begin 2013, Canadian economic data has looked sharp. Last week’s employment numbers were sharp, and this was followed by a strong Ivey PMI reading, which pointed to economic expansion. There is hope that 2013 will see an improvement in the global economy , which would translate into increased demand for Canadian oil and other raw materials, and help boost both the Canadian economy and the Canadian dollar. The Canadian economy remains in excellent shape compared with many other Western countries and both the IMF and OECD have predicted that Canada will continue to be among the strongest growing economies in the G-7 next year.
Taking a look at fundamentals, US consumer indicators painted a mixed picture. Economic Optimism rose to 46.5 points, which was a notch above the estimate of 46.3 points. This figure is a cause for concern, as it is the third consecutive reading under the 50 point threshold, indicating that consumers continue to be somewhat pessimistic about the US economy. At the same time, Consumer Credit jumped to a 3-month high, climbing to 16.0 billion dollars. This easily beat the estimate of 12.9B, and points to stronger consumer spending and confidence. In Canada, Housing Starts were up slightly to 198 thousand, which matched the market forecast. The markets were pleased with these numbers, given the housing indicator had fallen below the estimate in the previous two releases. Although the number of new housing starts is lagging slightly behind the average for 2012, the markets are hopeful that the housing industry will continue to show improvement. In the US, today’s two releases include – Crude Oil Inventories and the 10-year Bond Auction. Neither of these is expected to have an impact on the currency markets.
USD/CAD for Monday, Jan 9, 2013
Jan 9 at 14:25
0.9865 H: 0.9881 L: 0.9861
USD/CAD is showing little change, as the proximate support and resistance lines (S1 and R1 above) remain in place. The line of 0.9909 continues to provide resistance, and has not been tested since last week. We encounter stronger resistance at 0.9943. On the downside, 0.9845 is providing the pair with support. This line has seen a lot of activity this week, but is currently providing weak support. The next support level is 0.9812.
• Current range: 0.9845 to 0.9909.
Further levels in both directions:
• Below: 0.9845, 0.9812, 0.9767, 0.9625 and 0.9526.
• Above: 0.9909, 0.9943, 1.00, 1.0041, 1.0157 and 1.0252.
OANDA’s Open Position Ratios
The USD/CAD ratio remains with a strong bias in favor of long positions. This could be an indication that the US dollar will make inroads against the loonie. The pair has not been able to sustain any kind of drive in Tuesday trading so far, so we are unlikely to see much movement in the ratio for the time being.
Last week saw a lot of activity with USD/CAD, as the Canadian dollar took advantage of broad US dollar weakening. The tone has changed this week, as the pair has been quiet for the most part. With little in the way of economic releases until later in the week, we could be in for another low-key day.
• 13:13 Canadian Housing Starts. Estimate 198K. Actual 198K.
• 15:30 US Crude Oil Inventories. Estimate. 0.9M
• 18:00 US 10-year Bond Auction
*Key releases are highlighted in bold
*All release times are GMT