USD/CAD – Loonie Loses Ground After BOC’s Dovish Statement

USD/CAD has moved higher, and is trading in the low-1.04 range in Wednesday’s North American session. The pair is in a holding pattern as US Federal Reserve head Bernard Bernanke is testifying in Washington before a congressional committee. US releases did not impress, as Building Permits sagged to a three-month low. Housing Starts fared even worse, posting its weakest numbers since September 2012. In Canada, the BOC maintained the key interest rate at 1.00% and Foreign Securities Purchases slumped badly.

US releases were weak on Wednesday. Building Permits, a key release, fell from 0.97 million to 0.91 million. This was way off the forecast of 1.00 million. There was no relief from Housing Starts, which dropped from 0.91 million to 0.84 million, well below the estimate of 0.96 million. In Canada, Stephen Poloz presided over his first policy meeting as governor of the Bank of Canada, as the BOC kept its key interest rate pegged at 1.00%, as widely expected. Poloz noted that the economy continues to underperform and the forecast for inflation remains low. This dovish assessment weakened the Canadian dollar, as the BOC appears unlikely to reduce rates in the near future. Canadian Foreign Securities Purchases was a disappointment, sliding from C$14.91 billion to C$6.74 billion in June. This was well short of the estimate of C$10.23 billion.

The Federal Reserve takes center stage on Wednesday, as Fed chief Bernard Bernanke is testifying before the House Financial Services Committee in Washington. Bernanke will be questioned over the Fed’s Semiannual Monetary Policy Report, and the markets will be looking closely for any hints about QE tapering. The markets posted huge moves last week, after the release of the Fed’s policy minutes and dovish comments from Bernanke. The minutes pointed to a split amongst Fed policymakers weather to tighten QE sometime in 2013, or wait until the labor market improves. This was followed by speech by Bernanke, 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 dollar took a sharp hit following these developments. The markets will be looking for some guidance from Bernanke’s testimony, and if he hints at a timeline for QE tapering, we could see some volatility in the currency markets.

USD/CAD for Wednesday, July 17, 2013

USD/CAD 1.0424 H: 1.0437 L: 1.0356

USD/CAD Technical

USD/CAD has moved higher, as the pair trades in the low-1.04 range. The pair tested the 1.04 line in the European session but then retracted. It has regrouped and posted gains in the North American session, pushing into 1.04 territory. USD/CAD continues to face resistance at 1.0442. This is a weak line, and could face pressure if the US dollar can push higher. This is followed by strong resistance at 1.0502. On the downside, there is support at 1.0337. This is followed by a support level is at 1.0282.

• 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 is pointing to movement towards long positions in Wednesday trading. This is reflected in the movement we are seeing from the pair, as the US dollar moves higher. Short positions have a slight majority of the open positions, indicating a slight trader bias towards the loonie reversing direction and moving upwards.

USD/CAD has moved higher after dovish comments from the BOC. The markets continue to monitor Bernard Bernanke’s testimony in Washington, so we could still see some volatility from the pair during Wednesday’s North American session.

USD/CAD Fundamentals

• 12:30 US Building Permits. Estimate 1.00M. Actual 0.91M.
• 12:30 US Housing Starts. Estimate 0.96M. Actual 0.84M.
• 12:30 Canadian Foreign Securities Purchases. Estimate 10.23B. Actual 6.74B.
• 14:00 US Fed Chairman Bernard Bernanke testifies before the House Financial Services Committee in Washington.
• 14:00 BOC Rate Statement.
• 14:00 BOC Overnight Rate. Estimate 1.00%. Actual 1.00%.
• 14:30 BOC Monetary Policy Report.
• 14:30 US Crude Oil Inventories. Estimate -1.9M. Actual -6.9M.
• 16:30 US Federal Reserve Governor Sarah Bloom Raskin Speaks.
• 18:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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