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USD/CAD – Lower As Canadian Inflation Improves

The Canadian dollar has gained ground at the start of the new trading week. Early in the North American session, USD/CAD is trading in the mid-1.10 range. In economic news, Canadian inflation indicators were positive, as both the Raw Materials Price Index and Industrial Product Price Index showed strong improvements in January. In the US,  In the US, the focus is on several manufacturing releases, highlighted by ISM Manufacturing PMI.

The Canadian dollar is happy to say goodbye to the month of January, as the currency tumbled almost five cents against the US dollar. The month ended with a disappointing GDP release, with a gain of just 0.2%. February has started off well, as the loonie has moved higher on Monday, thanks to some solid inflation numbers. The Raw Materials Price Index bounced back from a sharp decline in December, posting a respectable gain of 1.7% in January. This was slightly short of the estimate of 1.9%. The Industrial Product Price Index followed suit with a 0.7% gain, marking a ten-month high.  The strong readings are welcome news, as inflation has been at persistently low levels, indicating an underperforming economy.

In the US, last week’s Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. The silver lining on Thursday was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the 2.8% gain in Q3. So where is the US economy headed? With GDP posting strong gains but employment numbers struggling, the recovery does not seem to be creating many new jobs, which could seriously hamper long-term economic growth.

In a highly anticipated decision, the US Federal Reserve pressed the taper trigger for a second month in a row last week . This reduces its stimulus program (QE) by another $10 billion, lowering the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernanke’s swan song, as Janet Yellen takes over the reins as the Fed chair on February 1.

 

USD/CAD for Monday, February 3, 2014

Forex Rate Graph 21/1/13

USD/CAD February 3 at 14:50 GMT

USD/CAD 1.1060 H: 1.1134 L: 1.1054

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0852 1.0906 1.1000 1.1094 1.1177 1.1319

 

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in long positions in Monday trading. This is not consistent with what we are seeing from the pair, as the Canadian dollar has posted gains. The ratio is made up of a majority of short positions, indicating a trader bias towards the Canadian dollar continuing to move upwards.

The Canadian dollar has started the week with gains. Early in the North American session, the US dollar remains under pressure.

 

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]

Market Analyst at OANDA [5]
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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