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USD/CAD – Little Movement After US Posts Solid GDP

USD/CAD continues to trade very quietly, as the pair trades at the 1.05 line in Thursday’s North American session. Taking a look at economic releases, US releases looked solid. Preliminary GDP beat the estimate while Unemployment Claims practically matched the forecast. In Canada, the Current Account Deficit widened, but still beat the estimate. The Raw Materials Price Index, an important inflation indicator, jumped to its highest level in over two years.

The markets are nervous as investors brace for a likely military strike by the US against Syria. The US has vowed to respond after a chemical attack in the war-torn country, apparently by the Syrian regime, killed hundreds of civilians. There are fears that a US attack could elicit a response from Syria or even Iran, so traders should expect to see volatility in the markets. There has been a report that the US may choose to strike on the weekend, which would give the markets time to adjust before opening on Monday. The uncertainty has boosted the US dollar against the major currencies, although USD/CAD has not shown much activity.

On Wednesday, there was another poor release out of the US, as Pending Home Sales looked weak. The key housing indicator posted its second straight decline, dropping 1.3% in August. This was well off the market estimate of 0.2%. US manufacturing indicators started off the week with sharp declines, although consumer confidence looked sharp. The dollar has remained strong despite the mixed data, thanks to the crisis over Syria as well as market speculation over QE tapering.

The Federal Reserve has not given many clues about when it might taper QE, but the recent Jackson Hole summit provided a glimpse of the divisions in the Fed as to when it might act. Fed chair Bernard Bernanke was a no-show at the summit, giving other policymakers an opportunity to express their views on QE. Dennis Lockhart, head of the Atlanta Fed, said that tapering could start in September, but only if US data 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. Bullard will make two appearances on Thursday, so we could see some reaction from the markets to his remarks. Meanwhile, the uncertainty over QE tapering has boosted the US dollar, raised the yields on US treasury bonds and led nervous investors to pull billions of dollars out of emerging markets. With September just around the corner, we could see strong volatility in the markets as speculation over QE heats up.

 

USD/CAD for Thursday, August 29, 2013

Forex Rate Graph 21/1/13
USD/CAD August 29 at 15:00 GMT

USD/CAD 1.0514 H: 1.0515 L: 1.0480

 

USD/CAD Technical

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

 

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

USD/CAD ratio has reversed direction and is pointing towards long positions in Thursday trading. This is reflected in the current movement of the pair, as the US dollar has posted minor gains against the loonie.

The pair continues to trade quietly very close to the 1.05 line. We could see the pair continue to show little movement during the North American session.

 

USD/CAD Fundamentals

 

*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 [4]

Currency Analyst at Market Pulse [5]
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.
Kenny Fisher

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