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USD/CAD – Edges Higher After Strong US Unemployment Claims

There was only one key event out of the US this week, and it was a good one, as Unemployment Claims came in below expectations. USD/CAD has moved slightly higher in Thursday trading, as the pair is back in the mid-1.00 range, where it has spent much of this week. In the only Canadian release today, NHPI edged down from 0.2% to 0.1%, matching the forecast. The markets will be keeping a close eye on key Canadian employment data, which will be released on Friday. 

US employment numbers continue to improve. On Thursday, Unemployment Claims showed almost no change from the previous week, coming in at 323 thousand. This was well below the estimate of 333 thousand. It also marked the third consecutive week that the key indicator has beaten expectations by a wide margin. The US posted a lot of weak numbers in April, so it remains to be seen if an improving employment picture will help the US economy pick up speed.

Taking a look 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 Europe, ECB head Mario Draghi continues to be in the spotlight following the ECB’s dramatic rate cut. Earlier this week, Draghi said that last week’s cut was taken due to the continuing slowdown in the Eurozone, and urged Eurozone countries to take the necessary steps to get their fiscal houses in order. Draghi repeated that the ECB was open to further rate cuts, as well as lowering its deposit rates below zero. When he mentioned the latter point last week, the euro took a dive, but this time, the markets did not react. However, not all policymakers favor further rate reductions. Yves Mersch, an ECB board member, stated that interest rate cuts have limits to their effectiveness, and that the ECB had other tools to help revive the Eurozone.

USD/CAD for Thursday, May 9, 2013

Forex Rate Graph 21/1/13
USD/CAD May 9 at 13:10 GMT

1.0032 H: 1.0045 L: 1.0014


USD/CAD Technical

S3 S2 S1 R1 R2 R3
0.9842 0.9930 1.00 1.0041 1.01 1.0157


USD/CAD continues to trade in the mid-1.00 range. The pair did push downwards earlier, but was unable to sustain the move. The pair is receiving support at the important parity line. This line has remained intact since mid-February. This is followed by stronger support at 0.9930. On the upside, the pair faces resistance at 1.0041. This is a weak line, and could fall if the US dollar shows any improvement. This is followed by resistance at the round number of 1.01.

Current range: 1.00 to 1.0041


Further levels in both directions:


OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in Thursday trading. This is consistent with what we are seeing from the pair, which has not shown much movement. Traders should continue to monitor the ratio, as an increase in activity could be an early sign that USD/CAD will break out of its narrow band.

US Unemployment Claims looked very sharp, but this could be a non-event for USD/CAD, since both countries benefit from stronger employment numbers out of the US. The markets will be paying close attention as Canada releases Employment Change and the Unemployment Rate on Friday. These numbers could have a major impact on the direction of USD/CAD.


USD/CAD Fundamentals


*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 [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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