USD/CAD – Steady in Thin Trade

The Canadian dollar has steadied as we start the new week, but remains close to the key 1.10 level. Early in the North American session, USD/CAD is trading in the mid-1.09 range. On Friday, US construction and employment data met expectations, but consumer confidence dipped. Monday’s trade has been light, as US markets are closed for the Martin Luther King holiday. There are no Canadian releases on Monday either, but it is a busy week north of the border, starting with Canadian Manufacturing Sales on Tuesday.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1%. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. On Wednesday, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten.

The Bank of Canada released its quarterly Business Outlook Survey last week, and the report showed that Canadian businesses were more optimistic in Q4 about investment and hiring compared to Q3. At the same time, companies dealing with the domestic market were less confident than those that rely on the global economy, which has shown improvement. Meanwhile, Canadian employment numbers looked awful 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 earlier in January. If Canadian key releases miss their estimates this week, the loonie will likely rise above the key 1.10 line.

USD/CAD for Monday, January 20, 2014

USD/CAD January 20 at 15:20 GMT

USD/CAD 1.0951 H: 1.0967 L: 1.0930

USD/CAD Technical

• USD/CAD has edged lower in Monday trading. The pair dropped to a low of 1.0930 during the Asian session.
• 1.0906 is providing support. This is followed by a support level at 1.0852.
• 1.1000 is the next line of resistance. This line could face pressure if the Canadian dollar continues to weaken. This is followed by 1.1094, which has remained intact since September 2009.
• Current range: 1.0906 to 1.1000

Further levels in both directions:

• Below: 1.0906, 1.0852, 1.0783, 1.0652 and 1.0573
• Above 1.1000, 1.1094, 1.1319 and 1.1496

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions in Monday trading. This is reflected in the pair’s movement, as the Canadian dollar has started the week with slight losses. USD/CAD is made up of a majority of short positions, indicating a trader bias towards the Canadian dollar moving to higher ground.

It’s a quiet start to the week, as the US markets are closed Monday for a holiday. USD/CAD continues to trade in the mid-1.09 range in the North American session.

USD/CAD Fundamentals

•  There are no releases out of the US or Canada on Monday

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.