USD/CAD – Unchanged As US Employment Numbers Falter

USD/CAD is virtually unchanged in Wednesday trading. Early in the North American session, the pair is trading in the mid-1.03 range. The US government shutdown is now its second day, as Republicans and Democrats continue to spar over how to end the budget crisis. In economic news, ADP Non-Farm Payrolls disappointed, dropping to a four-month low. There are no Canadian releases on Wednesday.

The US shutdown continues, as Congress remains in a partisan deadlock over how to come to some agreement over the federal budget. With the government lacking funds to operate, it has been forced to close non-essential services and send almost a million government workers home. The Republicans and Democrats are entrenched in their positions, but public pressure may force the politicians to get their act together quickly. If things are resolved sometime this week, it will have been more of a nuisance than a crisis. However, a much more serious crisis could occur in two weeks if Congress doesn’t reach an agreement on raising the debt ceiling. If that happens, the Treasury would be unable to pay all of its bills and the economic fallout could be tremendous.

The Federal Reserve surprised the markets in September when it didn’t taper QE, and the next dates to circle are October 29- 30, when the Fed holds its next policy meeting. Employment data will be an important factor in the Fed’s decision, and the US will release ADP Non-Farm Payrolls later on Wednesday. The all-important Non-Farm Payrolls, due for release on Friday, faces cancellation if the government shutdown continues.

Canadian GDP, released every month, looked sharp in August. The key indicator posted a healthy 0.6% gain, bouncing back from a disappointing decline of -0.5% in July. Canadian inflation indicators continue to point to low inflation. Raw Materials Price Index posted a gain of 0.9%, well off the estimate of 3.2%. The Industrial Product Price Index followed suit, posting a modest gain of 0.2%. The estimate stood at 0.9%. The Canadian dollar failed to improve despite the solid GDP release, and remains under strong pressure from the US dollar.

USD/CAD for Wednesday, October 2, 2013

USD/CAD 1.0333 H: 1.0356 L: 1.0332

USD/CAD Technical

• USD/CAD is unchanged on Wednesday, as the pair trades in the high-1.03 range.
• The pair is testing resistance at 1.0337. This line could fall if the Canadian dollar continues to lose ground. This is followed by a strong resistance line at 1.0442.
• The pair is receiving support at 1.0282. This is followed by a stronger support line at 1.0224.
• Current range: 1.0282 to 1.0337

Further levels in both directions:

• Below: 1.0282, 1.0224, 1.0158 and 1.0068
• Above 1.0337, 1.0442, 1.0502, 1.0573, 1.0652 and 1.0758

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged on Wednesday, extending a pattern we have seen all week. This is reflected in the current movement of the pair, which is showing little movement. The ratio is made up of a majority of long positions, indicative of a trader bias towards the US dollar moving higher.

USD/CAD is trading quietly, but the Canadian dollar is under pressure. The pair could continue to drift, unless there is some major progress to report with regard to the budget impasse that has paralyzed the US government.

USD/CAD Fundamentals

• 12:15 US ADP Non-Farm Employment Change. Estimate 177K. Actual 166K.
• 14:30 US Crude Oil Inventories. Estimate 2.4M.
• 16:00 US FOMC Member Eric Rosengren Speaks. Rosengren is dovish in stance.
• 19:30 US Federal Reserve Chairman Bernard Bernanke Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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