USD/CAD – Canadian Dollar Improves, Tests 1.05

The Canadian dollar has posted gains against the US currency on Wednesday. USD/CAD is testing the 1.05 line early in the North America session. In economic news, both the US and Canada released Trade Balance, and both releases pointed to wider deficits in August. As expected, the Bank of Canada maintained its benchmark interest rate at 1.00%.

The US released its first major event of the week on Tuesday. ISM Manufacturing PMI did not disappoint, climbing to its highest level since May 2011. The index rose to 55.7 points in August, beating the estimate of 54.2. Predictably, the strong figure has increased talk about QE tapering in September. With the Federal Reserve not letting on when it might start tapering QE, the markets are hungry for any news which could affect the timing of QE tapering. US releases, especially employment data, will continue to be scrutinized under the market microscope.

A US military strike against Syria is on hold, but tensions in the Middle East remain high. A military operation had seemed imminent last week, but President Obama announced on the weekend that he will seek Congressional approval before taking any action against Syria. With Congress in recess until September 9th, a military strike could be delayed until mid-September or even later. Russia has warned the US not to take any unilateral action against Syria, so we can expect the volatile situation to continue, bringing with it market volatility.

USD/CAD for Wednesday, September 4, 2013

USD/CAD 1.0514 H: 1.0542 L: 1.0579

USD/CAD Technical

• USD/CAD has lost ground in Wednesday trading, as the pair trades just above the 1.05 line. The pair dropped to a low of 1.0479 in the European session but has bounced back and crossed above the 1.05 line.
• The pair continues is putting strong pressure on 1.0502, which is protecting the 1.05 line. This is followed by a support line at 1.0442.
• USD/CAD continues to face resistance at 1.0573. This is followed by resistance at 1.0652. This line has remained intact since October 2011.
• Current range: 1.0502 to 1.0573

Further levels in both directions:

• Below: 1.0502, 1.0442, 1.0337 and 1.0282
• Above 1.0573, 1.0652, 1.0758 and 1.0888

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to movement towards short positions. This is reflected in the pair’s current movement, as the Canadian dollar has posted gains against the US dollar in Wednesday trading. A solid majority of the positions are short, indicating a strong trader bias towards the Canadian dollar posting gains against the US currency.

The Canadian dollar has shown some improvement as it tests the 1.05 level . We could see USD/CAD continue to trade close to this line in the North American session.

USD/CAD Fundamentals

• 12:30 Canadian Trade Balance. Estimate -0.3B. Actual -0.9B.
• 12:30 US Trade Balance. Estimate -38.7B. Actual -39.1B.
• 14:00 BOC Rate Statement.
• 14:00 BOC Overnight Rate. Estimate 1.00%. Actual 1.00%.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points. Actual 46.0 points.
• All Day – US Total Vehicle Sales. Estimate 15.8B.
• 18:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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