USD/CAD – Stable Ahead of Federal Reserve Minutes

USD/CAD is stable on Wednesday, as the pair trades in the mid-1.09 range in the North American session. On the release front, today’s highlight is the Federal Reserve policy meeting minutes, which should be treated by traders as a market-mover. In Canada, Wholesale Sales, a key event, softened in July but beat the estimate.

All eyes are on the Federal Reserve, which will release the minutes of its last policy meeting later on Wednesday. Traders are looking for clues as to when the Fed will press the trigger and raise interest rates, but may end up disappointed. Growth numbers have been positive, but job data could be better and inflation remains very low, so the Fed seems in no rush to tinker with interest rates. The Fed’s asset purchase program (QE) is scheduled to wind up in October, and then the guessing game regarding a rate hike will heat up.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%.  These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Friday. This will be Janet Yellen’s first appearance as Fed chair at the conference, and will undoubtedly be the star of the show. Yellen is expected to discuss the employment market rather than monetary policy, but the markets will be listening closely for any hints as to an interest rate hike.

USD/CAD for Wednesday, August 20, 2014

USD/CAD August 20 at 15:10 GMT

USD/CAD 1.0943 H: 1.0963 L: 1.0932

USD/CAD Technical

• USD/CAD pushed higher in the Asian and European sessions, but was unable to hold onto these gains. The pair is unchanged in North American trade.
• 1.0961 is under strong pressure. 1.1004 is next.
• 1.0852 is providing strong support. 1.0775 follows.
• Current range: 1.0852 to 1.0961

Further levels in both directions:

• Below: 1.0852, 1.0775, 1.0678 and 1.0588
• Above: 1.0961, 1.1004, 1.1124 and 1.1278

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions in Wednesday trade, reversing the direction seen a day earlier. This is not consistent with the pair’s current lack of movement. The ratio is evenly split between long and short positions, indicative of a lack of trader bias as to what direction the pair will take.

USD/CAD Fundamentals

• 12:30 Canadian Wholesale Sales. Estimate 0.4%. Actual 0.6%.
• 4:30 US Crude Oil Inventories. Estimate -1.3M. Actual -4.5M.
• 18:00 US FOMC Meeting Minutes.

* Key releases are in highlighted 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.