USD/CAD – Little Movement After Dismal US Manufacturing Numbers

USD/CAD is steady as we begin the new trading week. The pair is trading slightly above the 1.05 line early on in Monday’s North American session. In economic releases, US manufacturing numbers were a major disappointment, as both Core Durable Goods Orders and Durable Goods Orders posted declines. There are no Canadian releases on Monday.

When will the US Federal Reserve scale down QE? That is the million dollar question which continues to preoccupy the markets. The release last week of the FOMC didn’t provide any hints, but appeared to confirm that QE tapering is a question of “when” rather than “if”. The minutes showed that Fed policymakers favor scaling back the bond-buying program, but are divided on the timing of such a move. The policymakers stated that recent US economic data was “mixed”, and all members agreed that it was still too early to scale back the current bond-buying levels of $85 billion each month. QE is a dollar-positive event, so traders should prepare for the US currency to post gains against the major currencies when the Fed decides to taper.

The annual Jackson Hole Summit concluded on the weekend, but anyone expecting some clarity on QE tapering was in for a disappointment. Federal Reserve head Bernard Bernanke was a no-show, and other policymakers didn’t hesitate to share their views. Dennis Lockhart, head of the Atlanta Fed, said that tapering could start in September, but only if US economic numbers justified such a move. There was a more hawkish statement from James Bullard, head of the St. Louis Fed. Bullard said that there was no need for the Fed to rush into QE tapering. The uncertainty over QE tapering has boosted the US dollar, raised the yields on US treasury bonds and had worldwide repercussions, such as causing jittery investors to pull billions of dollars out of emerging markets.

US numbers got off to a rough start this week, as Core Durable Goods Orders declined 0.6%, a four-month low. The markets had expected a gain of 0.6%. Durable Goods Orders looked even worse, plunging 7.3%. This was way off the estimate of -3.0% and the indicator’s poorest performance since September 2012. These weak releases follow Friday’s New Home Sales, which also put in a very poor showing. The dollar has held steady despite these numbers, as the markets have been focusing on when the Fed might taper its QE program. However, if US data continues to look weak, we can expect the dollar to lose ground.


USD/CAD for Monday, August 26, 2013

Forex Rate Graph 21/1/13
USD/CAD August 26 at 14:25 GMT

USD/CAD 1.0516 H: 1.0534 L: 1.0500


USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0337 1.0442 1.0502 1.0573 1.0652 1.0758


USD/CAD is showing little movement as the proximate support and resistance lines (S1 and R1) remain intact. The pair stayed very close to the 1.05 line in the Asian session and edged higher in the European session, but has since retracted. USD/CAD faces resistance at 1.0573. This is followed by a resistance line at 1.0652. This line has held firm since October 2011.

On the downside, the pair is testing support at 1.0502. This line could break if the Canadian dollar shows any signs of recovery. This is followed by support at 1.0442.

  • Current range: 1.0502 to 1.0573


Further levels in both directions:

  • Below: 1.0502, 1.0442, 1.0337 and 1.0282
  • Above 1.0573, 1.0652, 1.0758 and 1.0888


OANDA’s Open Positions Ratio

USD/CAD ratio is pointing towards movement in the direction of long positions. This is reflected in the current movement of the pair, as the US dollar has posted very slight gains in Monday trading.

The Canadian dollar remains under pressure, as USD/CAD trades slightly above the 1.05 line. The loonie failed to take advantage of very weak US manufacturing numbers earlier on Monday, so we could see the pair continue to stay close to the 1.05 line during the day.


USD/CAD Fundamentals

  • 12:30 US Core Durable Goods Orders. Exp. 0.6%.  Actual -0.6%.
  • 12:30 US Durable Goods Orders. Exp. -3.0%. Actual -7.3%.


*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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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