USD/CAD is showing little movement in Friday trading, as the pair trades quietly in the 1.0130 range. On Thursday, the pair shrugged off weak US Unemployment Claims, as key US releases continue to point downwards. We could see a different script on Friday, with a host of US and Canadian releases. Highlights include US Non-Farm Employment Change, Canadian Employment Change and Canadian Ivey PMI.
With the US continuing to produce weak numbers, there is less talk about the deepening recovery. Last week saw a host of dismal US releases, as manufacturing, housing, consumer confidence and employment figures were all weak. The drought has continued into April, as PMI numbers and the ADP Non-Farm Payrolls fell way below expectations. On Thursday, Unemployment Claims brought no relief. Claims were up sharply to 385 thousand, well above the estimate of 352 thousand. The markets will be crossing fingers on Friday, with the US releasing Non-Farm Employment Change, the Unemployment Rate and Trade Balance. Further poor numbers out of the US, especially in Non-Farm Employment Change, are likely to raise red flags about the health of the US economy, and this could lead to some volatility in the currency markets. In Canada, it’s been a very quiet week as far as fundamental releases, but there are three key events scheduled on Friday – Employment Claims, Trade Balance and Ivey PMI.
USD/CAD had an uneventful Thursday, but things were anything but calm with regard to the Japanese yen and the euro. In Europe, the euro took the markets on a roller coaster ride, following the ECB policy meeting. In a widely-expected move, the ECB held the benchmark interest rate at a record-low of 0.75%. What jolted the markets was not the rate announcement, but rather the follow-up press conference with Mario Draghi. The head of the ECB hinted at a rate cut in the next few months, and the euro took a tumble in response. Draghi did not display his usual optimism that the Eurozone economy would turn the corner in the latter half of 2o13. Rather, he said that the ECB was “monitoring very closely” the struggling economy. Draghi did reassure the markets that the Cyprus bailout was a unique situation, and that a tax on bank deposits would not become normal procedure. The markets gave Draghi a thumbs up, as the euro recovered from its losses and then some, as EUR/USD closed the day above the 1.29 line.
In Japan, there had been speculation during the week that the Bank of Japan would not take any aggressive action at Thursday’s policy meeting, the first under new BOJ Governor Haruhiko Kuroda. The yen improved as a result, as USD/JPY dipped below the 93 level. However, the tables were turned on Thursday as the BOJ shocked the markets with bold easing measures. The steps include expanding QE to include riskier assets such as ETFs (exchange traded funds) and real estate investment funds. As well, the BOJ will purchase longer-term government bonds, a move aimed at pushing down longer-term interest rates to coax businesses to borrow (and spend) more. The BOJ stated that it plans to boost the monetary base by JPY60-70 trillion each year, reaching JPY270 trillion by the end of 2014.  The news led to a surge by the US dollar against the yen, with USD/JPY pushing above the 96 level.
USD/CAD for Friday, April 5, 2013
1.0138 H: 1.0142 L: 1.0127
USD/CAD continues to trade quietly in Friday trading. The pair is facing resistance at 1.0157. This is a weak line, and could be tested if the US dollar shows any upward movement. There is stronger resistance at 1.0229. On the downside, there is support at the round number of 1.01. This is followed by support at 1.0041. This line is protecting the psychologically-important parity level.
- Current range: 1.01 to 1.0157
Further levels in both directions:
- Below: 1.01, 1.0041, 1.00 and 99.46
- Above: 1.0157, 1.0229, 1.0282, 1.0361 and 1.0446
OANDA’s Open Position Ratios
The USD/CAD ratio continues to remain quiet, as it has for most of the week. This is reflected in the current lack of movement exhibited by the pair. The ratio is showing a solid majority of short positions, indicative of a bias toward the Canadian dollar improving against its US cousin.
USD/CAD has been marked by narrow range trading during the course of this week. This could change on Friday, with a host of US and Canadian major releases, highlighted by US Non-Farm Payrolls. So we could see some movement by the pair before the end of the trading week.
- 12:30 Canadian Employment Change. Estimate 6.8K.
- 12:30 Canadian Unemployment Rate. Estimate 7.1%.
- 12:30 Canadian Trade Balance. Estimate 0.2B.
- 12:30 US Non-Farm Employment Change. Estimate 198K.
- 12:30 US Unemployment Rate. Estimate 7.7%.
- 12:30 US Trade Balance. Estimate -44.8B.
- 12:30 US Average Hourly Earnings. Estimate 0.2%.
- 19:00 US Consumer Credit. Estimate 15.5B.
*Key releases are highlighted in bold
*All release times are GMT
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