USD/CAD – Rangebound As US Manufacturing Data Weakens

USD/CAD is trading in a narrow ranged as we start the new trading week. The pair is trading just above the 1.03 line in the North American session on Monday. There was dramatic news as former Treasury Secretary Lawrence Summers announced that he would not be seeking to replace Federal Reserve head Bernard Bernanke. In Monday releases, US Empire State Manufacturing Index dropped sharply and posted a four-month low. The sole Canadian release was positive, as Foreign Securities Purchases was up sharply and easily beat the estimate.

Bernard Bernanke will step down as head of the US Federal Reserve at the end of January, and the race to replace Bernanke has taken a dramatic twist. Former Treasury Secretary Lawrence Summers was considered the leading contender for the prestigious position. Surprisingly, Summers has withdrawn his nomination, leaving Vice Chairman Janet Yellen as the favored candidate. Yellen is considered dovish and may be hesitant when it comes to QE tapering. The dollar responded to the news of Summers’ withdrawal by losing ground against the major currencies.

US releases have run into some turbulence, and UoM Consumer Sentiment looked awful on Friday. The key indicator dropped from 80.0 points in July to 76.8 in August, its lowest level since March. This weak figure comes on the heels of weak US retail sales releases on Thursday. The yen has taken advantage of these poor US numbers and has gained about 150 points since the middle of last week. The new week didn’t start out much better, as Empire State Manufacturing Index, an important release, posted another sharp drop in August. The indicator fell from 8.2 points to 6.3 points. This was way off the estimate of 9.2 points. The markets are hoping that the US can get back on track on Tuesday ,with the release of Core CPI, a key event.

On Monday, Canadian Foreign Securities Purchases posted a gain of 6.09 billion dollars for August. This was in contrast to the sharp loss of -15.41 billion in July and easily beat the estimate of -2.23 billion. This indicator is closely related to currency demand, as larger purchases mean that foreigners are purchasing more Canadian dollars in order to purchase Canadian securities. Meanwhile, the Canadian unemployment rate has been lower than that of its southern neighbor since October 2008, but the differential has been narrowing. In August, Canada’s unemployment rate stood at 7.1%, with the US posting a 7.3% rate. Experts expect the US unemployment rate to finally fall below the Canadian one in 2014, as the US economy continues to pick up speed. This shift could hurt the Canadian dollar, which is having a tough time keeping pace with its US counterpart.

 

USD/CAD for Monday, September 16, 2013

Forex Rate Graph 21/1/13
USD/CAD September 16 at 15:00 GMT

USD/CAD 1.0318 H: 1.0323 L: 1.0283

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0158 1.0224 1.0282 1.0337 1.0442 1.0502

 

  • USD/CAD is very quiet in Monday trading, as the pair trades slightly above the 1.03 line.
  • The pair is facing resistance at 1.0337. This is a weak line which could fall if the US dollar shows any improvement. This is followed by resistance at 1.0442.
  • USD/CAD is receiving support at 1.0282. This is followed by a strong support line at 1.0224. This line has held firm since mid-June.
  • Current range: 1.0282 to 1.0337

 

Further levels in both directions:

  • Below: 1.0282, 1.0224, 1.0158 and 1.0068
  • Above 1.0337, 1.0442, 1.0502, 1.0573, 1.0652 and 1.0758

 

OANDA’s Open Positions Ratio

USD/CAD ratio  is unchanged in Monday trading. This is reflected in the current movement of the pair, which is trading in a very narrow range. The ratio is currently made up of a strong majority of long positions, after a long stretch of a majority of short positions. This shift is due to the strong gains posted by the Canadian dollar in September. This has resulted in the covering of numerous short positions, which has led to a greater percentage of long positions.

USD/CAD is having a very quiet start to the week. With no major US releases on Monday, we could see the pair continue to drift during the North American session.

 

USD/CAD Fundamentals

  • 12:30 Canadian Foreign Securities Purchases. Estimate -2.23B. Actual 6.09B.
  • 12:30 US Empire State Manufacturing Index. Estimate 9.2 points. Actual 6.3 points.
  • 13:15 US Capacity Utilization Rate. Estimate 77.8%. Actual 77.8%.
  • 13:15 US Industrial Production. Estimate 0.5%. Actual 0.4%.

 

*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 Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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