USD/CAD has started the new trading week quietly. Early in the North American session on Monday, we find the pair trading in the mid-1.03 level. Today’s only release out of the US was Existing Home Sales. The key indicator was a disappointment, posting a weaker reading than last month and missing the estimate. The G20 meeting wrapped up in Moscow on the weekend, and the G20 promised that any changes in monetary policy would be done in a careful way. There are no Canadian releases on Monday.
Finance ministers and central bankers from the G20 countries concluded a meeting in Moscow on the weekend. The G20 released a statement saying that future changes to monetary policy would be “carefully calibrated and clearly communicated”. This is likely a hint to the recent market turmoil in response to statements from the Federal Reserve regarding possible QE tapering. The Fed has not always sounded consistent, and predictably, the resulting uncertainty has rattled the markets. Leaders of the G20 will meet in St. Petersburg in September, and a final draft statement from the Moscow meeting noted that a plan to increase jobs and growth and rebalance debt will be ready for the September meeting.
Over in the US, Federal Reserve chair Bernard Bernanke was at center stage on Wednesday and Thursday, as he testified before Congress. However, Bernanke did not add anything we haven’t heard before, and his testimony was not a market-mover by any means. Bernanke reiterated that the Fed’s monetary policy would remain accommodative, and added that the Fed’s bond-buying program was “not on a preset course”. This vague statement leaves the Fed plenty of wiggle room to scale down QE should it choose to do so. Bernanke reiterated that any decision to scale down QE would depend on improving economic conditions. He noted that present US unemployment levels (7.6%) were “well above” normal levels, and was careful to stay away from presenting any specific time deadlines for scaling down QE. So, the message from the Fed to the markets seems to be that QE tapering is not on the table before the economy improves and unemployment falls.
Overshadowed by Bernanke’s testimony was some strong US data on Thursday. Unemployment Claims fell sharply and beat the estimate, while the Philly Fed Manufacturing Index surged, posting its best performance since March 2011. However, this week did not start off as well as the last one ended, with Existing Home Sales posting a drop from 5.18 million to 5.08 million, a two-month low. The markets were far too optimistic with an estimate of 5.27 million.
USD/CAD for Monday, July 22, 2013
USD/CAD 1.0353 H: 1.0363 L: 1.0331
USD/CAD has started the new trading week in subdued fashion. The proximate support and resistance levels (S1 and R1 above) remain in place from Friday’s close. The pair continues to face resistance at 1.0442. This is followed by a resistance line just above the 1.05 level, at 1.0502. On the downside, 1.0337 continues to provide support. This is a weak line, and the pair dipped below it in the European session. This is followed by support at 1.0282.
- Current range: 1.0337 to 1.0442
Further levels in both directions:
- Below: 1.0337, 1.0282, 1.0229, 1.0157 and 1.01
- Above: 1.0442, 1.0502, 1.0573, 1.0652, 1.0705 and 1.0780
OANDA’s Open Positions Ratio
USD/CAD ratio has started the new week unchanged. This is reflected in the pair, which is practically unchanged in Monday trading. The long and short positions in the ratio are almost evenly split, which indicates a lack of bias on the part of traders as to what we direction we can expect from the pair when it breaks out of the current narrow range.
The Canadian dollar has managed to hold its own against its US cousin last week – will this continue?
14:00 US Existing Home Sales. Estimate 5.27M. Actual 5.08M.
*Key releases are highlighted in bold
*All release times are GMT
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