USD/CAD – Unchanged to Start New Week

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

Forex Rate Graph 21/1/13
USD/CAD July 22 at 13:50 GMT

USD/CAD 1.0353 H: 1.0363 L: 1.0331

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0229 1.0282 1.0337 1.0442 1.0502 1.0573

 

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?

 

USD/CAD Fundamentals

14:00 US Existing Home Sales. Estimate 5.27M. Actual 5.08M.

 

*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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.