USD/CAD – Canadian Dollar Edges Higher

The Canadian dollar continues to post gains against the US currency. The pair was trading just above the 1.01 line in early trading in Thursday’s North American session. US Unemployment Claims beat the forecast, ending a long string of weak US releases. On Wednesday, the US released the minutes of the FOMC’s recent meeting, which pointed to a split among members as to what steps to take with regard to the current round of quantitative easing. There are no Canadian releases on Thursday. 

The Federal Open Market Committee released its meeting minutes on Wednesday, and the most exciting thing about the release was that it was leaked several hours ahead of schedule. The Federal Reserve was not amused, and has ordered an investigation into the matter. The minutes themselves turned out to be a non-event, with policymakers divided as to the extent and duration of the current round of QE. Some members wanted to wind down the program in the middle of 2013, while others felt it was more appropriate to wait until the end of the year. There was also discussion about whether to decrease the amount of asset purchases immediately, or continue the present levels until the end of the year. The division in opinion reflects uncertainty over the extent of the US recovery and the health of the economy. With the US reeling off a host of poor releases throughout April, FOMC members might have had a different take on the QE program had the meeting taken place in April rather than March.

US releases finally got back on track on Thursday, as Unemployment Claims easily beat expectations. The key indicator pointed to 346 thousand claims, a three-week low. The estimate stood at 362 thousand. The US has gone through a prolonged streak of key releases that have missed their estimates, dating back to late March. The markets will be hoping that the good news continues on Friday, as the US releases four key events – Core Retail Sales, PPI and Retail Sales and Consumer Sentiment.

With all the problems that the world’s major economies are experiencing, the danger of countries responding with protectionist policies is a serious source of concern. Underscoring this problem, the World Trade Organization downgraded its forecast for global trade growth in 2013, and stated that protectionism is on the increase. The WTO cut the 2013 forecast from 4.5% to 3.3%, and reported that trade in 2012 grew only 2.0%, one the weakest years on record. The WTO noted that events such as the Eurozone could result in countries restricting trade in an attempt to promote domestic growth. We are likely to see louder calls for protectionism if the global economic situation continues to deteriorate, as governments face increasing domestic pressure to shore up their lagging economies.

USD/CAD for Thursday, April 11, 2013

1.0109 H: 1.0157 L: 1.0084

USD/CAD Technical

USD/CAD has edged lower in Thursday trading. On the downside, there is pressure on the round number of 1.01. This line has already been breached today, and could see more activity. There is a stronger support line at 1.0041. On the upside, 1.0157 is providing resistance. This is followed by resistance at 1.0229.

• Current range: 1.01 to 1.0157.

Further levels in both directions:

• Below: 1.01, 1.0041, 1.00 and 99.46
• Above: 1.0157, 1.0229, 1.0282, 1.0361 and 1.0446

OANDA’s Open Position Ratios

After a lull on Wednesday, the USD/CAD ratio is pointing to movement towards long positions. We are not seeing this movement in the pair at present, as the Canadian dollar has made modest gains against the US currency. The activity in the ratio could be an early sign that the US dollar will bounce back and post gains. The short positions continue to comprise a slight majority of the open positions in the ratio.

The Canadian dollar has edged higher, as USD/CAD is trading close to the 1.01 line. We could see more movement from the pair, as the markets wait for several key US releases on Friday.

USD/CAD Fundamentals

• 12:30 US Unemployment Claims. Estimate 362K. Actual 346K.
• 12:30 US Import Prices. Estimate -0.4%. Actual -0.5%.
• 12:30 US FOMC Member James Bullard Speaks.
• 14:30 US Natural Gas Storage. Estimate -12B.
• 17:00 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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