USD/CAD – Canadian Dollar Improves as US GDP Disappoints

USD/CAD has reversed direction on Wednesday, as the Canadian dollar has posted gains. The pair is trading in the high-1.04 range late in the European session. In economic news, there are only a handful of economic releases. Today’s highlight was US Final GDP, which climbed higher but was well below the estimate. On Tuesday, US releases looked very sharp, and all three major releases beat their estimates. There is only one Canadian release on Wednesday, as BOC Deputy Governor Timothy Lane addresses a financial forum in Toronto.

The markets got a look at US GDP numbers on Wednesday, and the results were less than impressive. Final GDP did rise nicely, from 0.4% to 1.8%, but this was well short of the estimate of 2.4%. The Final GDP Price Index rose 1.2%, edging past the estimate of 1.1%. The weak GDP release put a damper on a bright market mood thanks to excellent US numbers on Tuesday. Core Durable Goods, CB Consumer Confidence and New Home Sales, all key releases, beat their estimates. Manufacturing data, often a sore spot, also looked good as the Richmond Manufacturing Index had its best performance since last November. The strong numbers are particularly encouraging as they come from a wide range of economic sectors.

Is the US Federal Reserve backtracking on QE? The US dollar surged last week after Federal Reserve Chair Bernard Bernanke said that the Fed was planning to scale down QE. However, US (and global) stock markets fell sharply on the news, and the Fed finds itself trying to contain the damage and calm the nervous markets. Dallas Fed President Richard Fisher declared that “tapering” should not be confused with “tightening” and said that the Fed was not exiting from its accommodative policy action just yet. Minneapolis Fed President Naraya Kocherlakota reiterated that the Fed was continuing with an expansionary monetary policy event if QE was terminated, and said that it was a misperception to assume that the Federal Reserve had turned more hawkish. One can be excused for dismissing these statements as little more than linguistic acrobatics, and it is questionable if the markets will be reassured by these statements from the Fed, which are clearly aimed at damage control and reassuring nervous investors.

USD/CAD for Wednesday, June 26, 2013

USD/CAD 1.0471 H: 1.0528 L: 1.0458

USD/CAD Technical

USD/CAD is moving lower in the Wednesday session. The pair dropped below the 1.05 line late in the Asian session and continues to move lower. USD/CAD is facing resistance at 1.0502. There is stronger resistance at 1.0652. On the downside, the pair is receiving support at 1.0442. This is a weak line, and could fall if the Canadian dollar continues its upward trend. The next support level is at 1.0337. 

• Current range: 1.0442 to 1.0502

Further levels in both directions:

• Below: 1.0442, 1.0337, 1.0282, 1.0229 and 1.0157
• Above:1.0502, 1.0652, 1.0705, 1.0780 and 1.0933

OANDA’s Open Positions Ratio

USD/CAD ratio is continuing the trend we saw on Tuesday, as the pair moves towards long positions. This is not currently reflected in the movement of the pair, as the US dollar has lost ground to the Canadian currency. Short positions continue to enjoy a strong majority of open positions, indicating a strong trader bias towards the pair continuing to move in a downward direction.

The Canadian dollar has been hit hard recently, but has taken advantage of weak US GDP numbers as it posts gains against the greenback. USD/CAD could settle down for the remainder of Wednesday, but traders should be prepared for a busy Thursday from the pair, as the US releases key employment numbers.

USD/CAD Fundamentals

• 12:30 US Final GDP. Estimate 2.4%. Actual 1.8%.
• 12:30 US Final GDP Price Index. Estimate 1.1%. Actual 1.2%.
• 14:30 US Crude Oil Inventories. Estimate -1.9M. Actual 0.0M.
• 16:00 Bank of Canada Deputy Governor Timothy Lane Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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