USD/CAD – Higher as US & Canada Release Mixed Numbers

USD/CAD has edged higher in Thursday trading. The pair posted gains in the European session, and was trading in the high-1.02 range. US key indicators provided a mixed picture. GDP fell below the estimate, while Unemployment Claims bounced back with an excellent reading. Canadian releases were also a mix, as Current Account missed the estimate, while RMPI easily beat the forecast. Back in Washington, Federal Reserve head Bernard Bernanke wrapped up his testimony on Capitol Hill.

For the most part, US releases have been very strong this week. However, there was disappointment in the air as Preliminary GDP for Q4, a major economic indicator, posted a lackluster gain of just 0.1%. This fell well below the estimate of 0.5%. As well, this was the weakest reading since 2009. The dismal release will likely raise red flags in the markets with regard to the health of the US economy. There was good news as well, as Unemployment Claims bounced back from a weak release last week, and dropped to 344 thousand. This was well below the forecast of 361K. Chicago PMI looked sharp, rising to 56.8 points. This easily topped the forecast of 54.6. Canadian releases were also mixed, as the Current Account Deficit narrowed to $17.3 billion. However, the markets had expected a better result, with an estimate of -16.9 billion. The Raw Materials Price Index shot up by 3.8%, well above the forecast of 1.4%. 

The Federal Reserve was in the spotlight this week, as Fed Chief Bernard Bernanke was busy testifying before the Senate and the House of Representatives. Bernanke sought to reassure the markets that the Fed was intent on continuing the current round of QE. Bernanke dismissed fears that the Fed’s current monetary policy could result in higher inflation or lead to a stock market bubble. There had been some speculation after the release of minutes from the most recent policy meeting, that the Fed was contemplating an end to QE, but Bernanke stated that Fed plans to continue QE and the current policy of ultra-low interest rates for the near future.

As the shockwaves from the Italian elections start to recede, the markets have settled down but remain jittery. Even by Italian standards, the election was a shocker, with no clear party emerging as a clear winner. The 5-Star Movement, which was largely a protest movement that was dubbed a “non-party”, shocked pundits by winning the most votes of any party. The Center-left bloc, headed by Pier Luigi Bersani, will have a majority in the lower house of parliament, but there is a near-split in the Senate. This leaves the country in a political deadlock, as any coalition must have a majority in both houses. Outgoing Prime Minister Mario Monti’s centrist bloc fared poorly at the polls, reflecting widespread voter dissatisfaction with Monti’s tough austerity measures. The political deadlock has rattled markets in Europe and beyond, and the stalemate could result in Italians going back to the polls.

USD/CAD for Thursday, Feb 28, 2013

USD/CAD Feb 28 at 14:50 GMT

1.0272 H: 1.0284 L: 1.0217

USD/CAD has moved higher, trading in the high-102 range. The proximate support and resistance lines remain intact (S1 and R1 above). The pair continues to face resistance at 1.0282. However, this is a weak line, and could break if the US dollar can sustain any upward momentum. The next line of resistance is at 1.0361. On the downside, there is support at 1.0229. This is followed by support at 1.0157, which is protecting the round number of 1.01. 

• Current range: 1.0229 to 1.0282

Further levels in both directions:

• Below: 1.0229, 1.0157, 1.01, 1.0041, 1.00 and 0.9940
• Above: 1.0282, 1.0361, 1.0446, 1.0523 and 1.0642

OANDA’s Open Position Ratios

The USD/CAD ratio is back in action after a lull on Wednesday. The ratio is pointing to sharp movement in the direction of short positions. This is consistent with what we are seeing from the pair, as the US dollar has posted gains in Thursday trading. With open long positions enjoying a 2:1 ratio over the short ones, trader sentiment remains strongly biased in favor of the US dollar continuing to make gains at the expense of the US dollar.

The US dollar continues to put pressure on the loonie, as it has for most of the week. Events in Italy have rattled the markets, and caused investors to seek the safety of the US dollar. Canada releases GDP on Friday, and this indicator should be treated as a market-mover. An unexpected reading could quickly affect the movement of USD/CAD.

USD/CAD Fundamentals

• 1:30 Canadian Current Account. Estimate -16.9B. Actual -17.3B
• 13:30 Canadian RMPI. Estimate 1.4%. Actual 3.8%
• 13:30 Canadian IPPI. Estimate 0.2%. Actual 0.0%
• 13:30 US Preliminary GDP. Estimate 0.5%. Actual 0.1%
• 13:30 US Unemployment Claims. Estimate 361K. Actual 344K
• 13:30 US Preliminary GDP Price Index. Estimate 0.6%. Actual 0.9%
• 14:45 US Chicago PMI. Estimate 54.6 points. Actual 56.8
• 15:30 US Natural Gas Storage. Estimate -165B
• 17:30 US FOMC Member Sarah Bloom Raskin Speaks

*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.