USD/CAD – Steady Ahead of Key US Releases

USD/CAD is trading quietly in the high-1.03 range as the markets open in North America on Friday. The Canadian dollar has taken advantage of broad US dollar weakness, and has gained about two cents against the greenback this week. On Thursday, US Unemployment Claims disappointed, coming in at 360 thousand. This was much higher than the estimate of 342 thousand. Canadian NHPI continues to post low gains, and came in at 0.1%. The estimate stood at 0.3%. On Friday, the US releases two key events – PPI and UoM Consumer Sentiment. There are no Canadian releases on Friday.

The release of the Federal Reserve minutes on Wednesday shook up the markets and resulted in the dollar taking a hit against the major currencies. The minutes indicated that Fed policymakers remain deeply divided over when to scale down the current round of QE, whereby the Fed purchases $85 billion in assets each month. About half of the Fed policymakers favor scaling down QE before the end of 2013, while others feel that the employment market is still too fragile for the Federal Reserve to take any action. Meanwhile, the dollar continued to lose ground as Federal Reserve chair Bernanke gave a speech in which he said that the Fed would maintain a loose monetary policy for the foreseeable future, due to low levels of inflation and a high US unemployment rate.  

The International Monetary Fund has released a report in which it upgraded Canadian growth in 2013 from 1.5% to 1.7%. However, the forecast for 2014 took the opposite direction, with a downgrade from 2.4% to 2.2%. The IMF is not optimistic about global growth, and is predicting a slowdown in emerging countries such as India and China. A particular sore spot is the Eurozone, which continues to grapple with economic and political problems. The IMF says the Eurozone will remain in recession throughout 2013, and downgraded its forecast from -0.4% to -0.6%. For 2014, the IMF trimmed its forecast from 1.0% to 0.9%.

USD/CAD for Friday, July 12, 2013

USD/CAD 1.0382 H: 1.0395 L: 1.0359

USD/CAD Technical

USD/CAD is steady on Friday, trading in the high 1.03 range. On the downside, the pair is receiving support at 1.0337. The next support level is at 1.0282. USD/CAD faces resistance at 1.0442. This is not a strong line, and could face pressure if the US dollar pushes higher. There is stronger resistance at 1.0502.

• Current range: 1.0337 to 1.0442

Further levels in both directions:

• Below: 1.0337, 1.0282, 1.0229 and 1.0157
• Above: 1.0442, 1.0502, 1.0573, 1.0652, 1.0705 and 1.0780

OANDA’s Open Positions Ratio

USD/CAD ratio has shown movement towards long positions in the latter part of the week. Currently, we are not seeing this reflected in the pair, which has settled down on Friday after recent gains by the Canadian dollar. Short positions now have a slight majority of the open positions, indicating slight trader bias towards the loonie continuing to move higher.

The Canadian dollar hopped on the bandwagon this week as the US dollar weakened broadly, and has dipped into 1.03 territory for the first time since mid-June. Will the loonie continue to improve? We could see some volatility from the pair before the week is out, as the US releases key inflation and consumer sentiment numbers later on Friday.

USD/CAD Fundamentals

• 12:30 US PPI. Estimate 0.5%.
• 12:30 US Core PPI. Estimate 0.2%.
• 13:55 US Preliminary UoM Consumer Sentiment. Estimate 85.3 points.
• 13:55 US Preliminary UoM Inflation Expectations. Estimate 3.1%.
• 15:00 US FOMC Member James Bullard Speaks.

*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.