USD/CAD – Steady as Markets Eye US Employment Data

USD/CAD is quiet in Friday trading, as the pair trades pushed back above the 1.01 level on Thursday. In economic developments, there was good news from the US on Thursday, as the Trade Balance and Unemployment Claims beat expectations. The markets are keeping a close eye on the US, which will release three key events later today – Non-Farm Payrolls, the Unemployment Rate and ISM Non-Manufacturing PMI. In the sole Canadian release, Bank of Canada Mark Carney will participate in a panel discussion in Toronto.

On Thursday, the ECB pulled the trigger and reduced interest rates to 0.50%, a record low. The rate had been pegged at 0.75% since July 2012. The move was widely expected, as the Eurozone economy remains in poor shape, and many of the major European economies are in recession. However, the euro initially moved higher before dropping sharply. The catalyst for the drop was comments by ECB head Mario Draghi that he was considering a negative deposit rate for banks. The deposit rate, which is what the ECB pays Eurozone banks for overnight deposits, currently stands at 0%. A negative rate could lead to funds flowing out of the Eurozone, and the euro was down more than one cent on Thursday as a result.

The US has been weighed down with poor releases since late March, so Thursday’s solid numbers were welcome news. The US trade deficit narrowed from $43.0 billion to $38.8 billion, easily beating the estimate of $42.1 billion. A well, Unemployment Claims were below expectations for the second straight week. The key indicator dropped from 339 thousand to 324 thousand, blowing past the estimate of 346 thousand. We’ll get a better picture of the US employment situation on Friday, as the US releases Non-Farm Payrolls and the Unemployment Rate.

Anyone who was expecting some dramatic news out of the Fed on Wednesday was sorely disappointed. The FOMC policy statement on Wednesday said little, as the Fed basically noted that it wasn’t willing to take further steps, despite signs of weakness in the US economy. There was no indication that the Fed would make any changes (higher or lower) to its current QE program of purchasing $85 billion in assets each month. The Fed did criticize the government’s economic policy, stating that current fiscal policy was restraining economic growth.

USD/CAD for Friday, May 3, 2013

1.0111 H: 1.0132 L: 1.0101

USD/CAD Technical

USD/CAD is trading slightly above the 1.01 level, as the US dollar edged higher on Thursday. The pair is facing resistance at 1.0157. This is followed by resistance at 1.0229. On the downside, the pair is receiving support at the round number of 1.01. The next support level is at 1.0041, protecting the important parity level.

Current range: 1.01 to 1.0157

Further levels in both directions:

• Below: 1.01, 1.0041, 1.00 and 0.9930.
• Above: 1.0157, 1.0229, 1.0282 and 1.0361

OANDA’s Open Positions Ratio

USD/CAD is not showing much movement in Friday trading. This is reflected in the pair, which is very quiet. Long positions have recently increased their majority of the open positions in the ratio, indicating a strong bias towards the US dollar improving against the loonie.

The US dollar has recovered partially from losses at the hands of the loonie earlier in the week. With the US releasing key employment numbers, we could see some volatility from the pair before the trading week is over.

USD/CAD Fundamentals

• 12:30 US Non-Farm Employment Claims. Estimate 146K.
• 12:30 US Unemployment Rate. Estimate 7.6%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 54.1 points.
• 14:00 US Factory Orders. Estimate -2.8%.
• 16:30 US Federal Reserve Governor Daniel Tarullo Speaks.
• 17:05 Bank of Canada Governor Mark Carney Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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