The markets are being treated to more of the same, as USD/CAD is continuing where it left off on Tuesday. The pair was trading quietly in the mid-1.00 range early in Wednesday’s North American session. Canada released mix data earlier in the week, as Building Permits were excellent, while Ivey PMI was way below expectations. USD/CAD shrugged off these key releases, and has shown very little movement this week. In Wednesday’s economic news, Canadian Housing Starts came in at 175 thousand, matching the forecast. In the US, it could shape up to be a quiet day, as the only economic releases are Crude Oil Inventories and an auction of 10-year US bonds.
Looking at Japan, USD/JPY continues to trade at high levels. At its recent policy meeting, the BoJ noted that it could take more than two years to reach its 2% inflation target. This possibility has been underscored by recent Japanese inflation releases, which continue to point to deflation in the economy, despite the best efforts of the BOJ to create some inflation. This has fuelled expectations that the BOJ will resort to further easing measures later in the year, as Prime Minister Abe and BOJ Governor Kuroda have stated very clearly that they will do whatever is needed to stamp out deflation, which has hobbled the Japanese economy for years. So we could see the yen continue to lose ground against the US dollar, and hit the elusive 100 level.
In China, Wednesday’s Trade Balance numbers looked sharp. After a rare deficit in the April reading, China reported a surplus of $18.2 billion in the May release. This beat the estimate of $15.5 billion, and was the key indicator’s best showing since February. However, traders should treat China’s trade data with caution, as the trade figures could be inflated to mask capital inflows into the country. Analysts have noted that a weak global economy has led to less demand for Chinese experts, so the figures being released by Chinese officials may not be accurate.
USD/CAD for Tuesday, May 8, 2013
1.0050 H: 1.0050 L: 1.0039
USD/CAD is showing little movement on Wednesday, as the pair trades quietly in the mid-1.00 range. The pair continues to face resistance at the round number of 1.01. This is followed by stronger resistance at 1.0157. On the downside, the pair is testing 1.0041. This line was breached earlier today, and could fall if the Canadian dollar shows any improvement. The next support level is at the all-important parity level.
Current range: 1.0041 to 1.01
Further levels in both directions:
- Below: 1.0041, 1.00, 0.9930 and 98.42
- Above: 1.01, 1.0157, 1.0229, 1.0282 and 1.0361
OANDA’s Open Positions Ratio
USD/CAD ratio is back in action after a lull on Tuesday. The ratio is pointing to movement toward long positions. This is not reflected in the current movement of the pair, as the loonie has edged higher. Long positions are dominant in the ratio, indicative of a strong bias towards the US dollar recovering and moving higher.
The Canadian dollar has been posting modest gains over the past few days and finds itself within striking distance of the all-important parity line. The US will post its first key event of the week on Thursday, as the markets get a look at Unemployment Claims. As well, Canada will release the New Housing Price Index. Until then, we can expect more drifting from the pair.
- 12:14 Canadian Housing Starts. Estimate 175K. Actual 175K.
- 12:30 US FOMC Member Jeremy Stein Speaks.
- 14:30 US Crude Oil Inventories. Estimate 2.1M.
- 17:00 US 10-year Bond Auction.
- 18:00 US Treasury Secretary Jack Lew Speaks.
*Key releases are highlighted in bold
*All release times are GMT