USD/CAD – Little Movement as US Key Releases Disappoint

We’re not seeing much movement from USD/CAD in Thursday trading. Early in the North American session, the pair is hugging the 1.03 line. This line has been in the thick of things for most of the week, as USD/CAD has been unable to break clear and muster some momentum. In economic releases, the markets are digesting some key US releases which came out earlier today. Unemployment Claims was higher and missed the estimate. Core Durable Goods Orders dropped to a three-month low, while Durable Goods Orders easily beat the estimate. There are no Canadian releases for the remainder of the week.

The Canadian dollar has been chipping away against its US cousin recently. Earlier this week, USD/CAD dropped below the 1.03 line for the first time since late-June, buoyed by strong Canadian retail sales numbers. The two currencies continue to engage in a see-saw battle around the 1.03 level, and the pair has so far not reacted to Thursday’s US releases, which were a mixed bag. Unemployment Claims was a disappointment, rising from 334 thousand to 343 thousand. The estimate stood at 339 thousand. Core Durable Goods Orders slid badly, dropping from 0.7% to a flat 0.0%. The markets were expecting a gain for the third consecutive month, with an estimate of 0.5%. Durable Goods Orders, a second tier release, looked much stronger, climbing from 3.6% to 4.2%, blowing past the estimate of 1.1%.

This week’s US housing releases has analysts scratching their heads, as the releases pointed in opposite directions. Earlier in the week, Existing Home Sales dropped from 5.18 million to 5.08 million, way off the forecast of 5.27 million. However, New Home Sales soared on Wednesday, jumping from 476 thousand to 496 thousand, well above the estimate of 482 thousand. This was the key housing indicator’s best performance in five years. With mixed housing releases this week, the markets will have to wait for the August releases to get a better handle on the direction of the US housing industry.

Will the Federal Reserve step in and scale down QE? This is the magic question facing the markets. Despite the zigzagging we’ve seen on this issue from the Fed, there is a strong likelihood that this will take place before the end of 2013, barring a major downturn by the US economy. There is growing speculation that the Fed could take action in September. Appearing on Capitol Hill last week, Fed chair Bernard Bernanke was careful not to get pinned down with any specific deadlines, and instead said that stronger growth and lower unemployment were the key factors to any action over QE. The problem with this approach is the markets remain in the dark, and every strong US release fuels expectation about QE tapering, while a weak release does the opposite. This of course, contributes to market instability, as we’ve seen in recent months with the US dollar. The G20 seemed to have this issue in mind when it issued a statement that member countries had agreed that future monetary policy moves would be “carefully calibrated and clearly communicated”. Whether the Fed will suddenly show its cards is doubtful, especially in light of Bernanke’s vague and rather dull performance in front of Congress last week.

 

USD/CAD for Thursday, July 25, 2013

Forex Rate Graph 21/1/13
USD/CAD July 25 at 13:55 GMT

USD/CAD 1.0292 H: 1.0319 L: 1.0276

 

USD/CAD Technical

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

 

USD/CAD continues to flirt with the 1.03 level on Thursday, leaving the proximate support and resistance levels (S1 and R1) intact. The pair was fairly quiet in the Asian and European sessions, staying above the 1.03 for most of that time. USD/CAD weakened in the North American session and has dropped below the 1.03 line. The pair continues to face resistance at 1.0337. This line is not strong, and could face pressure during the day. This is followed by strong resistance at 1.0442. On the downside, 1.0282 finds itself under strong pressure, and was tested earlier in the North American session. This line could break if the loonie continues to improve. This is followed by a stronger support level at 1.0229.

  • Current range: 1.0282 to 1.0337

 

Further levels in both directions:

  • Below: 1.0282, 1.0229, 1.0157, 1.0062 and 1.00
  • Above: 1.0337, 1.0442, 1.0502, 1.0573, 1.0652

 

OANDA’s Open Positions Ratio

USD/CAD ratio has been very quiet this week, but that changed on Wednesday, as we are seeing movement towards long positions. This is not reflected in the pair’s current movement, as we’re seeing little movement from the pair. Long positions enjoy a majority, indicating that trader sentiment is biased towards the US dollar moving higher.

USD/CAD continues to hover close to the 1.03 line. The Canadian dollar posted gains on Tuesday with strong Canadian retail numbers, and the US dollar will try to repay the favor with a solid housing release later in the day. Barring an unexpected reading, we could see the pair continue to trade close to the 1.03 line.

 

USD/CAD Fundamentals

  • 12:30 US Core Durable Goods Orders. Estimate 0.5%. Actual 0.0%.
  • 12:30 US Unemployment Claims. Estimate 339K. Actual 343K.
  • 12:30 US Durable Goods Orders. Estimate 1.1%. Actual 4.2%.
  • 12:45 US Treasury Secretary Jack Lew Speaks.
  • 14:30 US Natural Gas Storage. Estimate 44B.

 

*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.