USD/CAD – Little Change Ahead of FOMC Statement

USD/CAD is trading quietly on Wednesday, and was trading in the 1.0070 range early in the North American session. The loonie has  been making steady progress against the US dollar, and USD/CAD fell below the 1.01 line on Tuesday. In the US, ADP Non-Farm Employment Change was well  below expectations, and the markets are waiting for the ISM Manufacturing PMI release later today. This will be followed by the FOMC Statement. Today’s lone Canadian release is a speech by Bank of Canada head Mark Carney.

The Canadian dollar has joined the parade of currencies taking advantage of the broadly weaker US dollar. On Tuesday, the pair dropped below 1.01, its lowest level since mid-April. The loonie was helped by Canada’s GDP release, which pointed to growth of 0.3%, slightly better than the estimate of 0.2%. The Canadian currency has gained about two cents against its US currency in the past week.

The US has treated the markets to weeks of poor data, but this week has looked much better. On Monday, US Pending Home Sales recorded a gain of 1.5%, beating the forecast of 1.1%. The next day, CB Consumer Confidence jumped to 68.1 points, blowing past the estimate of 61.4 points. However, ADP Non-Farm Payrolls disappointed, dropping to 119 thousand. This was way off the estimate of 154 thousand. The markets will be hoping that today’s key manufacturing numbers look better. The Federal Reserve holds a policy meeting later today, and is expected to endorse continuing with the current QE program. This is a dollar-negative event, so we could see a reaction from USD/CAD following the FOMC Statement.

Will he or won’t he? This question is looming large, as the markets anxiously wait to see whether Mario Draghi and his colleagues at the ECB will press the trigger and lower in interest rates for the first time since last July. The Eurozone continues to stagnate with poor releases, highlighted by another record high for Eurozone Unemployment Rate, which edged to 12.1%, up from 12.0%. Speculation that the ECB will take action and lower rates is growing, and most analysts are expecting a cut in rates. All eyes will be on the ECB,  which will announce the new rate on Thursday. Whether the ECB takes action or leaves the rate as is, we could be in for some volatility in the currency markets.

USD/CAD for Wednesday, May 1, 2013

1.0086 H: 1.0086 L: 1.0051

USD/CAD Technical

USD/CAD is steady in Wednesday trading. The pair is facing resistance at the round number of 1.01. This is a weak line, and could face pressure if the US dollar can rebound. This is followed by stronger resistance at 1.0157. On the downside, there is weak support at 1.0041. The next support level is at the all-important parity level.

Current range: 1.0041 to 1.01

Further levels in both directions:

• Below: 1.0041, 1.00 and 0.9930.
• Above: 1.01, 1.0157, 1.0229, 1.0282 and 1.0361

OANDA’s Open Position Ratios

USD/CAD continues to show movement towards long positions. We are not seeing this currently from the pair, which is very quiet. However, this activity could be an early sign of a breakout by the pair in an upwards direction. Long positions have increased their majority of the open positions in the ratio, indicating a strong bias towards the US dollar improving against the loonie.

The Canadian dollar has taken advantage of some broad weakness by the greenback, and has pushed past the 1.01 line. We could see some stronger activity from the pair, as the US releases key manufacturing data and the Fed releases a statement.

USD/CAD Fundamentals

• 12:15 ADP Non-Farm Employment Change. Estimate 154K. Actual 119K.
• 13:00 US Final Manufacturing PMI. Estimate 52.1 points. Actual 52.1 points.
• 14:00 US ISM Manufacturing PMI. Estimate 51.0 points.
• 14:00 US Construction Spending. Estimate 0.7%
• 14:00 US ISM Manufacturing Prices. Estimate 52.6 points.
• 14:30 US Crude Oil Inventories. Estimate 1.2M.
• All Day: US Total Vehicle Sales. Estimate 15.2 M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.
• 22:05 Bank of Canada Governor Mark Carney Speaks

*Key releases are highlighted in bold

*All release times are GMT

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