USD/CAD – Rangebound as US Employment Numbers Sag

USD/CAD continues to trade quietly on Thursday, as the pair was trading in the 1.0150 range early in the North American session. The pair is having an uneventful week, and has not reacted to continuing weak US releases. On Thursday, it was the turn of US Unemployment Claims to disappoint. The key indicator was higher than the estimate last week, and this week’s reading was even worse. There were 385 thousand new claims, way above the estimate of 352 thousand. 

The continuing bad news out of the US is raising concerns about the strength of the US recovery. Last week saw a host of dismal US releases, as manufacturing, housing, consumer confidence and employment figures all fell below expectations. The disappointing numbers have continued into April, as PMIs and the ADP Non-Farm Employment Change were way below the estimates. These weak key releases come from a wide range of sectors, raising concerns about the extent of the US recovery. There are no Canadian releases on Thursday, but there are four key releases on Friday – Employment Change, Unemployment Rate, Trade Balance and Ivey PMI.

Today’s major story was the BOJ policy meeting. Throughout the week, the yen was firm, as speculation grew that the BOJ would not take any aggressive action at Thursday’s policy meeting, the first under new BOJ Governor Haruhiko Kuroda. The Japanese currency showed some muscle, as USD/JPY dipped below the 93 level. However, the tables were turned on Thursday as the BOJ surprised everyone with aggressive easing steps. The measures include expanding QE to include riskier assets such as ETFs (exchange traded funds) and real estate investment funds. As well, the BOJ will purchase longer-term government bonds, a move aimed at pushing down longer-term interest rates to coax businesses to borrow (and spend) more. The BOJ stated that it plans to boost the monetary base by JPY60-70 trillion each year, reaching JPY270 trillion by the end of 2014. The Japanese yen took a tumble on the news, dropping sharply against the US dollar.

The drama and uncertainty in Cyprus, one of the Eurozone’s smallest members, continues, even though a bailout plan has been accepted by all sides. Strict capital controls are still in place in Cyprus in order to prevent a run on the banks. Under the bailout agreement, bank deposits below EUR1000,000 are safe, but larger accounts with the Bank of Cyprus will be facing a haircut of up to 60%. An amount of 37.5% of these deposits will be converted into bank shares, and up to 22.5% more could be grabbed in order to prop up the Bank of Cyprus’ reserves. This steep tax is expected to have a strong negative impact on the country’s business sector, and the government has admitted that the country is in recession. In order to help the ailing economy, the government plans to lift a ban on casinos and provide tax exemptions on business profits that are reinvested on the island. President Nicos Anastasiades has acknowledged that the bailout agreement is a bitter pill for Cypriots, but said that refusing the agreement would have meant the collapse of the banking sector and could have led to Cyprus’ exit from the Eurozone. In a dramatic development, Cyprus finance minister Michael Sarris has resigned. His resignation comes as Cyprus initiates a formal investigation to examine the events which lead to the EUR10 billion bailout.

USD/CAD for Thursday, April 4, 2013

1.0143  H: 1.0167 L: 1.0133

USD/CAD Technical

USD/CAD continues to trade in a narrow band as the proximate support and resistance levels remain in place (S1 and R1 above). The line of 1.0157 continues to provide resistance, but this is a weak line, which could be tested if the US dollar shows any improvement. There is stronger resistance at 1.0229. On the downside, there is support at the round number of 1.01. This is followed by a support level at 1.0041. This line is protecting the all important parity level.

• Current range: 1.01 to 1.0157

Further levels in both directions:

• Below: 1.01, 1.0041, 1.00 and 99.46
• Above: 1.0157, 1.0229, 1.0282, 1.0361 and 1.0446

OANDA’s Open Position Ratios

The USD/CAD ratio is showing little movement in the Thursday session. This is reflected in what we are seeing from the pair at present, as USD/CAD trades in a narrow range. The ratio is dominated by short positions, indicating that trader sentiment is biased towards the Canadian dollar posting gains against the US currency.

USD/CAD seems content drifting in the mid-1.01 range, and has shown little interest in weak employment numbers out of the US. We could see further drifting in today’s North American session. However, with six major releases scheduled on Friday from Canada and the US, traders should expect an increase in activity from the pair on Friday.

USD/CAD Fundamentals

• 11:30 US Challenger Job Cuts. Actual 30%.
• 12:30 US Unemployment Claims. Estimate 352K. Actual 385K.
• 12:45 US FOMC Member Charles Evan Speaks
• 14:30 US Fed Chairman Bernard Bernanke Speaks
• 14:30 US Natural Gas Storage. Estimate -89B
• 16:30 US FOMC Member Esther George Speaks
• 21:00 US FOMC Member Janet Yellen 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.