- MarketPulse - https://www.marketpulse.com -

USD/CAD: Loonie Firm as Key Canadian Data Mixed

USD/CAD has posted modest gains on Friday, as the pair trades just above the 1.07 line late in the European session. The Canadian dollar picked up ground as Wholesale Sales jumped 2.2%. However, Core CPI declined by 0.1%, its worst showing in 2014. In the US, Friday’s highlight is Preliminary UoM Consumer Sentiment, with the markets expecting a strong reading.

The Canadian dollar is showing some movement on Friday, so the pair could be active in the North American session. Wholesale Sales gained 2.2%, crushing the estimate of 0.7%. This was the indicator’s sharpest rise since last June. The news was much worse from Core CPI. The key inflation index came in at -0.1%, marking a seven-month low. This did, however, match the forecast. CPI posted a weak gain of 0.1%, also matching expectations. However, the indicator slipped badly from the previous release of 0.5%.

The BOC was in the spotlight on Wednesday, as the central bank maintained the benchmark interest rate at 1.00%, where it has been pegged since September 2008. Bank of Canada Governor Stephen Poloz stated that the central bank was neutral on the direction of the next rate move, which would be data-dependent. Analysts do not expect any change in rates prior to mid-2015, based on weak inflation and growth levels which continue to bog down the Canadian economy. The markets will be keeping a close eye on Core CPI, which will be released on Friday. A stronger than expected reading will fuel likely speculation about an interest rate hike and could push the loonie to higher ground. Meanwhile, Canadian Manufacturing Sales surprised with a gain of 1.7%, beating the estimate of 1.3%. It was the strongest gain we’ve seen since last August.

US Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. At the same time, the housing sector is struggling, and Building Permits fell to 0.96 million, its lowest level since January. The markets had expected a much stronger reading, with an estimate of 1.04M. Housing Starts followed suit, coming in at 0.89 million, compared to an estimate of 1.02 million. Finally, the Philly Fed Manufacturing Index sparkled, jumping to 23.9 points, well above the estimate of 15.6 and its best showing since February 2011.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Fed’s asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

 

USD/CAD for Friday, July 18, 2014

USD/CAD July 18 at 13:55 GMT

USD/CAD 1.0727 H: 1.0763 L: 1.0709

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0414 1.0572 1.0678 1.0775 1.0852 1.0961

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions on Friday. This is consistent with the movement of the pair, as the Canadian dollar has made gains. The ratio has a substantial majority of long positions, indicative of strong trader bias towards the US dollar reversing direction and gaining ground.

 

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

Latest posts by Kenny Fisher (see all [4])