USD/CAD – US Dollar Edges Higher on Strong Employment Data

Wednesday is keeping the markets busy, with five major releases from Canada and the US this afternoon. The highlight of the day was US employment numbers. ADP Non-Farm Payrolls posted a four-month gain, while Unemployment Claims came in just below the estimate. However, both the Trade Balance and ISM Non-Manufacturing PMI disappointed. In Canada, Trade Balance posted a smaller deficit which beat expectations. USD/CAD has edged higher and is trading in the mid-1.05 range in the North American session.

US employment data continues to improve. ADP Non-Farm Payrolls, an unofficial release which precedes Friday’s government release, posted a gain of 188 thousand, its best showing since March. The estimate stood at 161 thousand. Unemployment Claims, released ahead of the July 4th holiday, came in at 343 thousand, slightly below the estimate of 345 thousand. The US continues to churn out larger trade deficits, as the July release came in at -$45.0 billion, much higher than the estimate of $-40.3 billion. Finally, the ISM Non-Manufacturing PMI looked weak, dropping from 53.7 points to 52.2 points. This was well short of the estimate of 54.3 points.

In Canada, the Trade Balance numbers looked better than those south of the border. The trade deficit narrowed from $-0.6 billion to $-0.3 billion, surprising the markets which had anticipated a larger deficit of $-0.7 billion. Meanwhile, the Canadian dollar remains at its lowest level since October 2011. A report last week indicated that Canadian GDP fell in April to 0.1%, compared to a 0.2% gain in March. Strong US releases point to a deeper recovery, and the Canadian economy has failed to keep pace, hurting the Canadian dollar.

Global growth has been weak for some time, and there was more bad news on Friday, as an HSBC report downgraded its forecast for global growth. Global GDP was cut from 2.8% to 2.0% in 2013, and from 3.1% to 2.6% in 2014. In its report, HSBC said that it had lowered its forecast due to the US Federal Reserve decision to cut QE, as well as a sharp slowdown in China and other emerging countries such as India and Brazil. The report also revised China’s GDP from 8.2% to 7.4% for 2013 and from 8.4% to 7.4% for next year. Weaker global growth will be bad news for countries which heavily depend on exports, such as Canada, Japan and Australia, and could have a negative impact on these countries’ currencies.

USD/CAD for Wednesday, July 3, 2013

USD/CAD 1.0541 H: 1.0565 L: 1.0518

USD/CAD Technical

USD/CAD has edged higher, as the pair trades in the mid-1.05 range. The pair has not showed a lot of movement, and the proximate support and resistance lines (S1 and R1 above) remain in place. The pair continues to face weak resistance at 1.0573. The pair briefly pushed above this line on Tuesday, and it could face further pressure. This is followed by a strong resistance line at 1.0652. This line has not been tested since October 2011. On the downside, the pair is receiving support at 1.0502, protecting the 1.05 line. This is followed by a stronger support level at 1.0442. This line has strengthened as the pair trades at higher levels.

• Current range: 1.0502 to 1.0573

Further levels in both directions:

• Below: 1.0502, 1.0442, 1.0337, 1.0282, 1.0229 and 1.0157
• Above: 1.0573, 1.0652, 1.0705, 1.0780 and 1.0853

OANDA’s Open Positions Ratio

USD/CAD ratio has shifted directions, with movement towards long positions in the Wednesday session. This is reflected in what we are seeing from the pair, as the US dollar has edged higher against the Canadian currency. Short positions continue to enjoy a substantial majority of the open positions, indicating a strong trader bias towards the pair reversing direction and moving lower.

There were five major releases between the two countries on Wednesday, but USD/CAD did not show much interest, as it trades quietly in the mid-1.05 range. We could see this trend continue during the day, and continue on Thursday, when US markets take off for the July 4th holiday.

USD/CAD Fundamentals

• 11:30 US Challenger Job Cuts. Actual 4.8%.
• 12:15 US ADP Non-Farm Employment Change. Estimate 161K. Actual 188K.
• 12:30 US Trade Balance. Estimate -40.3B. Actual -45.0B.
• 12:30 US Unemployment Claims. Estimate 345K. Actual 343K.
• 12:30 Canadian Trade Balance. Estimate -0.7B. Actual -0.3B.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 54.3 points. Actual 52.2 points. 
• 14:00 US Treasury Secretary Jack Lew Speaks.
• 14:30 US Crude Oil Inventories. Estimate -2.6M.

*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.