USD/CAD – Loonie Rebounds After Sharp Losses

The Canadian dollar has posted gains in Monday trading, as USD/CAD continues to trade at high levels. Early in the North American session, the pair is trading in the high-1.08 range. On Friday, Canadian Employment Change slid to a nine-month low, while the Unemployment Rate jumped to 7.2%. It’s a quiet start to the week, with just two releases on Monday’s schedule. Canada will release the Bank of Canada Business Outlook Survey, while in the US, today’s sole release is the Federal Budget.

The Canadian dollar’s woes continue, as the currency trades at its lowest levels since October 2009. The Canadian dollar had an awful week, losing about 250 points against the US dollar, as USD/CAD came close to the key 1.10 line late in the week. Canadian data continued to disappoint last week, as Employment Change tumbled to -45.9 thousand, erasing a strong gain of 21.6 thousand a month earlier. This was nowhere near the estimate of 14.4 thousand. The unemployment rate, which had hovered at 6.9% for three straight readings, jumped to 7.2%. The dismal figures came on the heels of weak numbers from Building Permits and the Ivey PMI. If Canada continues to produce weak numbers, the loonie could soon find itself on the other side of the key 1.10 line.

US employment numbers started 2014 on a positive note, but Friday’s Non-Farm Payrolls was dismal, posting its lowest gain since May 2012. The key employment indicator dropped to just 74 thousand, down from 203 thousand a month earlier. This was nowhere near the estimate of 196 thousand.  Although the unemployment rate dropped to 6.7%, this was due to a drop in the participation rate, which fell to 62.8%, its lowest level since 1978. This figure points to a worrying trend of a jobless US recovery.

Friday’s disappointing Non-Farm Payrolls report may create some concern in the markets, but is unlikely to change the Federal Reserve’s path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each meeting. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next meeting.  

USD/CAD for Monday, January 13, 2014

USD/CAD January 13 at 15:15 GMT

USD/CAD 1.0880 H: 1.0930 L: 1.0865

USD/CAD Technical

• USD/CAD has edged lower in Monday trading. The pair dropped below the 1.09 line late in the European session.
• 1.0852 has reverted to a support role as the Canadian dollar weakens. This is followed by a support level at 1.0783.
• 1.1000, a key level, is the next line of resistance. This is followed by 1.1094, which has remained intact since September 2009.
• Current range: 1.0852 to 1.1000

Further levels in both directions:

• Below: 1.0852, 1.0783, 1.0652, 1.0573 and 1.0502
• Above 1.1000, 1.1094 and 1.1319 and 1.1496

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged in Monday trading, continuing the trend we saw much of last week. This is not reflected in the pair’s movement, as the Canadian dollar continues to lose ground. USD/CAD is made up of a majority of short positions, indicating a trader bias towards the Canadian dollar reversing its downward spiral and moving to higher ground.

The Canadian dollar has reversed its recent slide and posted gains in Monday trading. USD/CAD lost ground late the European session and continues to point downwards in North American trading.

USD/CAD Fundamentals

• 13:30 Bank of Canada Business Outlook Survey.
• 19:00 US Federal Budget Balance. Exp. 44.3B.

*Key releases are highlighted in bold

*All release times are GMT

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