USD/CAD – Slight Gains by Loonie Movement As Markets Eye FOMC Meeting

USD/CAD is not showing much movement in Tuesday trading. In the North American session, the pair is trading just below the 1.03 line. The markets are eagerly awaiting the FOMC Statement, which will be issued on Wednesday. In economic news, US Core CPI matched the market forecast, with a small rise of 0.1%. Canadian Manufacturing Sales looked excellent, posting its sharpest gains in five months.

This week’s highlight is the FOMC Statement, scheduled for release on Wednesday, when the Federal Reserve concludes its two-day policy meeting. The markets have been speculating about QE tapering for months, and we could see the Fed take action in the upcoming statement. However, there is a stronger likelihood that QE tapering will not begin till later in the year, as US economic releases, particularly employment data, could be stronger. Traders should be prepared for some volatility in the currency markets following the FOMC Statement release.

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 Surprisingly, Summers has withdrawn his nomination, leaving Vice Chairman Janet Yellen as the favored candidate.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.

Canadian releases have looked sharp this week. On Monday, Foreign Securities Purchases posted a gain of 6.09 billion dollars, easily surpassing the estimate of -2.23 billion. This was followed by Manufacturing Sales, which jumped 1.7%, its best reading since March. The estimate stood at 0.6%. 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 Tuesday, September 17, 2013

USD/CAD 1.0289 H: 1.0335 L: 1.0276

USD/CAD Technical

• USD/CAD is steady in Tuesday trading. The pair has crossed below the 1.03 level in the North American session.
• The pair is facing weak resistance at 1.0337.This is followed by a stronger line at 1.0442.
• USD/CAD is testing support at 1.0282. This line could fall if the Canadian dollar improves. This is followed by a stronger 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 remains unchanged in Tuesday trading, continuing the trend we saw on Monday. This is not reflected in the current movement of the pair, as the Canadian dollar is showing slight improvement. 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 continues to trade close to the 1.03 line. With Canada posting a strong manufacturing release earlier in the day, we could see some further modest gains for the Canadian dollar during the North American session.

USD/CAD Fundamentals

• 12:30 Canadian Manufacturing Sales. Estimate 0.6%. Actual 1.7%.
• 12:15 US Treasury Secretary Jack Lew Speaks.
• 12:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
• 12:30 US CPI. Estimate 0.2%. Actual 0.1%.
• 13:00 US TIC Long-Term Purchases. Estimate -45.3B. Actual 31.1B.
• 14:00 US NAHB  Housing Market Index. Estimate 59 points. Actual 58 points.

*Key releases are highlighted in bold

*All release times are GMT

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