USD/CAD – Almost Unchanged As US Employment Numbers Sizzle

USD/CAD continues to drift, as the pair trades slightly above the parity line. There was excellent news out of the US on Thursday, as Unemployment Claims dropped sharply. There are important releases on Friday from Canada and the US. Both countries will be releasing manufacturing data, and the markets will also be keeping an eye on US Consumer Sentiment figures. In Moscow, the G-20 begins a two-day meeting, and one of the topics on the agenda will be currency exchange rates.

On Thursday, the markets were pleased as US Unemployment Claims dropped to 341 thousand, its lowest level in five years. The estimate stood at 361 thousand. This key indicator has been well below the 400K rate, which should translate into job growth. However, the unemployment rate remains stubbornly high, close to 8%. The reason for this is as the economy improves, more people who were out of the work force try again to find employment, which keeps the unemployment rate at high levels. Although employment numbers have shown improvement in 2013, the same cannot be said about US consumer confidence and manufacturing. The markets will be hoping for a turnaround in these sectors, as the US releases the Empire State Manufacturing Index and UoM Consumer Sentiment on Friday. Both of these key indicators have looked weak, and are market-movers in their own right. Thus, we could see USD/CAD shake out of its listless movement in a hurry if either of these releases surprises the markets. In Canada, the week wraps up with Manufacturing Sales. The markets are bracing for a decline, and the loonie could respond negatively to a weak reading.

In Moscow, world financial leaders will meet for two days, as the G-20 Summit gets underway on Friday. The leaders are expected to discuss currency rates, which have shown strong fluctuations, notably the Japanese yen. The Japanese government has been criticized for its monetary policy, which has seen the yen’s value plummet over the past few months. In response, Japan says that it is trying to eliminate deflation, and has not directly targeted the yen. Meanwhile, the G-7 issued a statement earlier in the week, affirming its commitment to market- determined exchange rates. Although the G-20 will discuss the matter, given the need to reach a joint communiqué at these meetings, any statement on currencies will have to be agreeable to all of the countries attending the summit.

USD/CAD for Friday, February 15, 2013

USD/CAD February 15 at 11:10 GMT

1.0025 H: 1.0026 L: 1.0003

USD/CAD continues to drift, as it sticks close the parity level. The pair tested support at parity earlier, but retracted after failing to break through. The next support level is at 0.9954. On the upside, the pair is facing weak resistance at 1.0041. This followed by strong resistance at the round number of 1.01.

Current range: 1.00 to 1.0041

Further levels in both directions:

• Below: 1.00, 0.9954, 0.9898, 0.9833 and 0.9809

• Above: 1.0041, 1.01, 1.0157 and 1.0286

OANDA’s Open Position Ratios

The USD/CAD ratio is continuing with the direction we saw on Thursday, with steady movement in favor of long positions. The US dollar has inched upwards, but the pair remains boxed in, slightly above the parity line. The activity in the ratio could signal that the US dollar will break out and push higher against the loonie.

It’s been a fairly quiet week for USD/CAD, which spent most of the week slightly above parity. This drifting could continue into the weekend, barring unexpected readings on Friday from either Canada or the US.

USD/CAD Fundamentals

• All Day: G-20 Meetings (Day 1).
• 13:30 Canadian Manufacturing Sales. Estimate -0.4%.
• 13:30 US Empire State Manufacturing Index. Estimate -2.1 points.
• 14:00 US TIC Long-Term Purchases. Estimate 34.3B.
• 14:15 US Industrial Production. Estimate 0.2%.
• 14:55 US Preliminary UoM Consumer Sentiment. Estimate 74.8 points.
• 14:55 US Preliminary UoM Inflation Expectations.

*Key releases are highlighted in bold

*All release times are GMT

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