USD/CAD – Loonie Stays Above Parity In Subdued Trading

USD/CAD is showing little activity as we begin the new trading week. The pair continues to stay close to parity, with the greenback and loonie in a dogfight for bragging rights as to who is on top of the parity level. Currently, the Canadian dollar is enjoying a slight edge, as the pair was trading in the 0.9970 range.  In the US, key indicators were again mixed at the end of last week. Employment numbers were a disappointment, as Non-Farm Payrolls did not meet the estimate and the unemployment rate moved higher. However, consumer sentiment and manufacturing data looked sharp. There are no Canadian releases scheduled on Monday.

There are a host of key Canadian releases, this week, including PMI, construction and employment data. The markets are keeping expectations low with regard to Employment Change, despite outstanding numbers in the past two releases. There is a widely-held view that these strong numbers do not conform with other key indicators, which point to a slowing down of the Canadian economy. If Canadian employment numbers do indeed show a sharp slide later this week, we could see the loonie lose some ground.

US indicators continue to keep the markets guessing about the extent of the US recovery. Last week produced more mixed data. GDP was a major disappointment, as the economy contracted for the first time since 2009. Employment numbers lost their recent shine, as NFP and Unemployment Claims failed to meet expectations, and the unemployment rate inched up to 7.9%. On the bright side, last week’s consumer sentiment and manufacturing PMI data was very strong. UoM Consumer Sentiment climbed to 73.8 points, well above the estimate of 71.4 points. ISM Manufacturing PMI hit an eight-month high of 53.1 points, easily exceeding the forecast of 50.8 points. With only a handful of key US releases this week, each one will find itself under the market microscope as the markets try to get a handle on where the US economy is headed.

The US Federal Reserve was in the spotlight last week, as the powerful US central bank met for a two-day policy meeting. There were no surprise developments, as the Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. The Fed noted that economic growth had stalled, but was confident that the pause was a temporary one. This laid to rest speculation that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, might be terminated anytime soon. The Fed maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment hovering close to 8%, we’re unlikely to see this target met anytime soon.

USD/CAD for Monday, February 4, 2013

USD/CAD February 4 at 14:15 GMT

0.9976 H: 0.9980 L: 0.9948

USD/CAD Technical 

USD/CAD continues to trade close to the parity line, and has started the week with narrow range trading. Currently the pair is slightly below the important threshold. The pair faces resistance just above parity, at 1.0003. This is a weak line, and could face pressure if the greenback is able to sustain any momentum towards parity. This is followed by resistance at 1.0041. On the downside, the pair continues to receive support at 0.9954. The line of 0.9898 is a stronger support level.

Current range: 99.54 to 1.0003.

Further levels in both directions:

• Below: 0.9954, 0.9898, 0.9833, 0.9809 and 0.9767.
• Above: 1.0003, 1.0041, 1.01, 1.0157, 1.0207, 1.0286, 1.0365 and 1.0443.

OANDA’s Open Position Ratios

USD/CAD ratio continues to point to movement towards long positions. However, the movement is not as strong as that seen late last week. Most of the open positions are in the long position camp, indicating that trader sentiment is biased towards an upward move by the US dollar against its Canadian counterpart. Will we see the pair break out of its narrow range and push upwards, towards the parity line?

The pair finds continues to stick close to the parity line, and has been unable to sustain any momentum is either direction. This narrow range trading could continue, with only one economic release scheduled for Monday.

US/CAD Fundamentals 

• 15:00 US Factory Orders. Estimate 2.3%.

*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.