USD/CAD – Volatile After Strong US GDP, Employment Data

USD/CAD is showing some strong movement in Wednesday trading. In North American trading, the pair has pushed into the low-1.03 range, but has retracted back into 1.02 territory. The US dollar received a brief boost from solid US releases earlier in the day, as GDP and ADP Non-Farm Employment Change easily beat their estimates. However, the greenback has been unable to hold onto these gains. North of the border, Canadian GDP posted a very modest gain of 0.2%.

US releases have been pointing in all directions lately, so Wednesday’s GDP and employment releases were certainly welcome news. ADP Non-Farm Employment Change, which precedes the all-important official Non-Farm Employment Change on Friday, climbed from 188 thousand to 200 thousand. This was the indicator’s strongest showing since January, and convincingly beat the estimate of 179 thousand. Advance GDP also got the job done, posting a strong gain of 1.7% in Q2. The Q1 reading was much higher, at 2.5%, but the markets were pleased, as the estimate stood at 1.1%. We’ll get a look at more key employment releases on Thursday and Friday, and strong data could revive talk about QE tapering, which would be a dollar-positive event.

Also in the US, CB Consumer Confidence, a key release, dropped slightly to 80.3 points. This was short of the estimate of 81.1 points, but with a reading of above 80 points, the indicator remains in very high territory in comparison to the levels we saw earlier in 2013. Keeping in mind that last week’s UoM Consumer Sentiment hit a multi-year high, consumer confidence is looking rosy in the US. The key question is will stronger consumer confidence translate into more borrowing and spending, which would bolster job growth and increase economic activity.

Canada also released GDP numbers on Wednesday. Unlike in the US, these figures are on a monthly basis. GDP has shown only modest growth in 2013, with the sharpest gain reaching just 0.3%. The July reading came in at 0.2%, matching the market forecast. Canadian GDP was clearly outperformed by its US counterpart, but the Canadian dollar is hanging tough and holding its own against the US currency.

USD/CAD for Wednesday, July 31, 2013

USD/CAD 1.0298 H: 1.0335 L: 1.0287

USD/CAD Technical

USD/CAD is showing some volatility and is back below the 1.03 line, after the pair pushed as high as 1.0335 earlier in the North American session. USD/CAD is facing resistance at 1.0337. The pair tested this line earlier, but has since retracted below the 1.03 level. This is followed by stronger resistance at 1.0442. On the downside, 1.0282 is providing support. This is a weak line, and could fall if the loonie can show some momentum. 1.0229 is the next support line. It has remained intact since mid-June.

• Current range: 1.0282 to 1.0337

Further levels in both directions:

• Below: 1.0282, 1.0229, 1.0157, 1.0062 and 1.00
• Above: 1.0337, 1.0442, 1.0502, 1.0573, 1.0652

OANDA’s Open Positions Ratio

USD/CAD ratio continues to point to movement towards long positions in Wednesday trading. The US dollar did post gains earlier in the North American session, but the Canadian dollar has battled  back, so the movement in the ratio is not reflected in the pair’s current movement. We have seen a steady shift towards long positions since mid-July. As a result, long positions enjoy a substantial majority of positions, indicating strong trade bias towards the US dollar posting gains against the Canadian currency.

USD/CAD has shown some volatility in Wednesday’s North American session, and we could see further activity from the pair, with the Federal Reserve releasing a policy statement later today.

USD/CAD Fundamentals

• 12:15 US ADP Non-Farm Employment Change. Estimate 179K. Actual 200K.
• 12:30 Canadian GDP. Estimate 0.2%. Actual 0.2%.
• 12:30 US Advance GDP. Estimate 1.1%. Actual 1.7%.
• 12:30 US Advance GDP Price Index. Estimate 1.1%. Actual 0.7%.
• 12:30 US Employment Cost Index. Estimate 0.4%. Actual 0.5%.
• 13:45 US Chicago PMI. Estimate 53.7 points. Actual 52.3 points.
• 14:30 US Crude Oil Inventories. Estimate -21.M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.

*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.