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USD/CAD – Loonie Improves after Disappointing US Numbers

USD/CAD has moved lower in Thursday trading. The pair was trading close to the 1.03 line in the North American session. US numbers were dismal on Thursday, as Unemployment Claims shot higher and was way above the estimate. US Preliminary GDP posted a gain of 2.4%, short of the estimate of a 2.5% gain. US Pending Home Sales fared no better, falling well below expectations. The Canadian dollar also got some help from Current Account, which posted a smaller deficit.

The Canadian dollar has taken advantage of weak numbers out of the US earlier today. Unemployment Claims, which often moves the markets, disappointed this week. The key indicator jumped from 340 thousand to 354 thousand. This was well above the estimate of 342 thousand. Preliminary GDP rebounded nicely, climbing from 0.1% to 2.4%. However, this missed the estimate of 2.5%. Pending Home Sales was dismal, posting a weak gain of 0.3%, way off the estimate of 1.3%. The weak numbers will raise questions about the US recovery, and could hurt the US dollar. In Canada, the loonie got a boost from Current Account, which narrowed to $14.1 billion, beating the estimate of $15.3 billion. RMPI was not as sharp, declining 2.2%. The estimate stood at -0.7%.

On Wednesday, Bank of Canada Governor Mark Carney presided over his final policy meeting. Carney, who has headed the central bank since  2007,  will take the reins of the Bank of England next month, and will be replaced at the BOC by Stephen Poloz. There were no farewell surprises from Carney, who kept interest rates pegged at 1.00%.  In its rate statement, the BOC  stated that the “continued slack” in the Canadian economy as well as a weak inflation outlook justified maintaining rates at their present levels.

In the US, the Federal Reserve hasn’t made any changes to the current round of quantitative easing, which stands at $85 billion in asset purchases each month. Fed policymakers, including Fed Chair Bernanke, have not been shy about dropping clues that QE could be altered or even terminated in the next few months. The currency markets have reacted sharply to such talk, and much of the volatility we are seeing in the currency markets is a reflection of market uncertainty as to what the Fed plans to do. Talk of an end to QE has given a boost to the dollar, and we can expect the currency markets to continue to be very sensitive to further talk of tapering QE.

 

USD/CAD for Thursday, May 30, 2013

Forex Rate Graph 21/1/13
USD/CAD May 30 at 14:45 GMT

USD/CAD 1.0310 H: 1.0389 L: 1.0309

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0157 1.0229 1.0282 1.0337 1.0442 1.0502

 

USD/CAD has moved lower in Thursday trading. The pair faces resistance at 1.0337. This  is a weak line, and could be tested if the US shows any sign of recovery. This is followed by resistance at 1.0442. On the downside, 1.0282 is providing support. The next support level is 1.0229.

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

USD/CAD ratio has shifted directions, and is currently pointing to movement towards long positions. This is not reflected in the current movement of the pair, as the Canadian dollar has posted strong gains. The ratio continues to have a majority of short positions, indicating a bias towards the Canadian dollar continuing to post gains against the US currency.

After a quiet start to the week, USD/ CAD continues to show volatility, as the Canadian dollar has strengthened after some disappointing key US releases on Thursday. The pair could show more movement on Friday, as Canada releases GDP and the US releases a host of events.

 

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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