USD/CAD – Canadian Dollar Stable After Huge Drop

The Canadian dollar has stabilized on Monday, after posting sharp losses on Friday, when USD/CAD jumped about 170 points. The pair is trading just under the 1.18 line in the North American session. In the US, there is just one minor release on the schedule, Total Vehicle Sales. As well, FOMC Member John Williams will speak at an event in Boston. There are no Canadian releases on Monday.

On Friday, US ISM Manufacturing PMI disappointed, falling to 55.5 points. This missed the forecast of 57.6 points and marked a 6-month low for the index. Still, market sentiment remains positive regarding the US economy and the US dollar continues to look sharp against its major rivals. We’ll get a look at the ISM Non-manufacturing PMI on Tuesday. The markets are expecting a softer reading in the December release.

The first trading day of 2015 turned into Black Friday for the Canadian dollar, which lost a remarkable 170 points on the day. The US dollar posted strong gains against its major rivals, and the loonie was hit hard as well, ending the week just below the 1.18 line. December was a month to forget for the Canadian dollar, which lost almost 500 points to the surging US currency.

In contrast to the rosy picture in the US, the Canadian economy could be in for some turbulence in early 2015. As a major oil exporter, falling oil prices have taken a big bite out of government revenues and hurt the economic recovery. The Canadian consumer is not in the best of moods, and a reduction in consumer spending will have a negative impact on the labor market and hurt the economy. In 2014, The Canadian dollar lost 8.7% of its value against its US counterpart in 2014 and is currently at its lowest levels since May 2009. If the US dollar rally continues, the psychologically important 1.20 line could find itself under pressure shortly.

USD/CAD for Monday, January 5, 2015

USD/CAD January 5 at 16:00 GMT

USD/CAD 1.1788 H: 1.1812 L: 1.1762

USD/CAD Technical

• USD/CAD has shown limited movement on Monday.
• 1.1723 is an immediate support line. 1.1669 is next.
• 1.1875 is the next resistance line. It has held firm since May 2009.
• Current range: 1.1723 to 1.1875

Further levels in both directions:

• Below: 1.1723, 1.1669, 1.1580, 1.1493 and 1.1414
• Above: 1.1875, 1.1975, 1.2096 and 1.2190

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged on Monday. This is consistent with the lack of movement displayed by the pair. The ratio has a majority of short positions, indicative of trader bias towards the Canadian dollar moving to higher ground.

USD/CAD Fundamentals

• 13:00 US FOMC Member John Williams Speaks.
• All Day – US Total Vehicle Sales. Estimate 16.9M.

*Key releases are highlighted in bold

*All release times are GMT

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