USD/ CAD – Pair Remains Rangebound as US Numbers Sparkle

USD/CAD continues to trade in a narrow range in Thursday trading, as the pair drifts in the mid-1.02 range. USD/CAD showed little response as US employment numbers continue to impress. It is a quiet week for Canadian releases, as the only two events of the week were published today. Both the New Housing Price Index and the Capacity Utilization Rate matched their estimates.

US Unemployment Claims looked sharp, beating the market estimate for the third straight week. The key indicator, released every week, pointed to 332 thousand new claims, well below the estimate of 348 thousand. It was also the second-lowest number  of new claims in 2013. PPI posted a gain of 0.7% and Core PPI rose 0.2%. Both inflation indicators matched the estimate. Current Account recorded a deficit of $110 billion, just beating the forecast of $111 billion. In Canada, Thursday’s releases were uneventful. NHPI came in at 0.1%, exactly as expected. Capacity Utilization Rate was almost unchanged, at 80.7%. The estimate stood at 80.8%. 

In the US, economic indicators continue to point upwards. This is a welcome change from the pattern we have been seeing for many months, of a mix of strong and weak data, sometimes from the same sector of the economy. The markets have reacted with a thumbs up, and the US dollar has been broadly stronger as a result. Employment numbers continue to be stellar, and  this week saw strong retail sales figures, indicating stronger consumer spending. The positive readings have spread to other sectors as well, as Import Prices, Business Inventories and Crude Oil Inventories all beat their respective estimates. If the good news continues and market sentiment continues to improve, look for the US dollar to post gains against other currencies.

In Japan, the markets are bracing for the Bank of Japan to implement further monetary easing measures, as the yen continues to struggle. These sentiments were reinforced following tough comments from the incoming BOJ head. During confirmation hearings, Haruhiko Kuroda declared that he would do “whatever it takes” to beat deflation and reach the government’s inflation target of 2.0%. The incoming governor reiterated that he is confident that an effective monetary policy could defeat deflation, which continues to weigh heavily on the Japanese economy. Kuroda noted that the current amount of asset buying by the BOJ will not achieve the 2.0% inflation goal. There are media reports that Kuroda may start implementing additional easing immediately upon assuming office next week, rather than wait until the BOJ’s next policy meeting in April. There were no surprises as the BOJ released the minutes of its February meeting, at which the central bank maintained its monetary policy. Some members stated they were in favor of buying Japanese Government Bonds with longer remaining maturities if additional monetary easing is needed in the future.

USD/CAD for Thursday, March 14, 2013

1.0268 H: 1.0284 L: 1.0254

USD/CAD Technical Analysis

USD/CAD continues to trade quietly, as the pair hovers in the mid-1.02 range. The pair is facing resistance at 1.0282. This is a weak line, and could be tested if the US dollar shows is able to move higher. There is stronger resistance at 1.0361. On the downside, the pair is receiving strong support at 1.0157. This line has held steady since late February. The next support level is at 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 and 1.00
• 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 movement towards short positions. This is not reflected in the current lack of movement by the pair, but could signal an expectation for the Canadian dollar to break out and post gains against the US currency.

USD/CAD has shown little activity this week, and strong US consumer spending and employment numbers have not had much impact on the pair, which continues to be boxed in the mid-1.02 range. There are a couple of key releases out of the US, but unless the readings really shake up the markets, we could be in for further drifting by the pair right up to the weekend.

USD/CAD Fundamentals

• Canadian NHPI. Estimate 0.1%. Actual 0.1%
• Canadian Capacity Utilization Rate. Estimate 80.7%. Actual 80.8%
• 12:30 US PPI. Estimate 0.7%. Actual 0.7%
• 12:30 US Unemployment Claims. Estimate 348K. Actual 332K
• 12:30 US Core PPI. Estimate 0.2%. Actual 0.2%
• 12:30 US Current Account. Estimate -111B. Actual -110B
• 13:00 US FOMC Member Sarah Bloom Raskin Speaks
• 14:30 US Natural Gas Storage. Estimate -136B
• 17:00 US 30-year Bond Auction
• 21:30 US Bank Stress Test Results

*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.