USD/CAD – Loonie Under Pressure As US Employment Numbers Slide

The Canadian dollar is under pressure in Wednesday trading, as USD/CAD has pushed above the 1.11 level early in the North American session. In economic releases, Canadian Building Permits posted another sharp decline and came in well below the estimate. Things weren’t much better on the US employment front, as ADP Employment Change dropped sharply, hitting a three-month low. ISM Non-Manufacturing PMI improved in January and beat the estimate.

Canadian Building Permits continues to slide, posting a decline of 4.1% in January. The markets had expected a strong gain of 2.3%. This decline follows another sharp drop of 6.7% a month earlier, indicating trouble in the critical construction industry. In the US, ADP Non-Farm Employment took a hit, sliding to 175 thousand, compared to 238 thousand a month earlier. This was well shy of the estimate of 191 thousand. Is the ADP release a prelude to bad news from the official Non-Farm Payrolls report on Friday? If the NFP falters as well, the Fed could delay its next QE taper and the fallout from such a negative message could hurt the US dollar.

The Canadian dollar is happy to say goodbye to the month of January, as the currency tumbled almost five cents against the US dollar. The month ended with a disappointing GDP release, with a gain of just 0.2%. February has started off well, as the loonie moved higher on Monday, thanks to some solid inflation numbers. The Raw Materials Price Index bounced back from a sharp decline in December, posting a respectable gain of 1.7% in January. This was slightly short of the estimate of 1.9%. The Industrial Product Price Index followed suit with a 0.7% gain, marking a ten-month high. The strong readings are welcome news, as inflation has been at persistently low levels, indicating an underperforming economy.

USD/CAD for Wednesday, February 5, 2014

USD/CAD February 5 at 15:00 GMT

USD/CAD 1.1107 H: 1.1116 L: 1.1037

USD/CAD Technical

• USD/CAD is steady in Wednesday trading. The pair lost ground earlier in the day but has posted gains in the North American session.
• 1.1094 has reverted to a support level. This is followed by a support line at the key level of 1.1000.
• On the upside, 1.1174 is the next line of resistance. This is followed by resistance at 1.1319.
• Current range: 1.1094 to 1.1177

Further levels in both directions:

• Below: 1.1094, 1.1000, 1.0906, 1.0852 and 1.0783
• Above: 1.1177, 1.1319, 1.1496 and 1.1610

OANDA’s Open Positions Ratio

USD/CAD ratio is unchanged in Wednesday trading. This is consistent with what we are seeing from the pair, as the Canadian dollar is holding its own against the US currency. The ratio continues to be made up of a majority of short positions, indicating a trader bias towards the Canadian dollar moving upwards.

USD/CAD remains at high levels, trading above the 1.111 level. The US dollar is pushing higher in the North American session, as the Canadian dollar remains under pressure.

USD/CAD Fundamentals

• 13:15 US ADP Non-Farm Employment Change. Estimate 191K. Actual 175K.
• 13:30 Canadian Building Permits. Estimate 2.3%. Actual -4.1%.
• 14:00 US Final Services PMI. Estimate 56.6 points. Actual 56.7 points.
• 15:00 US ISM Non-Farm Manufacturing PMI. Estimate 53.6 points. Actual 54.0 points.
• 15:00 US FOMC Member Daniel Tarullo Speaks.
• 15:30 US Crude Oil Inventories. Estimate. 2.2M. Actual 0.4M.
• 17:30 US FOMC Member Charles Plosser Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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