USD/CAD – Gains for Loonie As Canadian Housing Starts Shines

The Canadian dollar has posted gains on Thursday, as USD/CAD trades in the mid-1.08 range in the North American session. The loonie has had a strong week, climbing about 130 points against its US counterpart. In economic news, Canadian Housing Starts jumped to a six-month high in April. In the US, Unemployment Claims rebounded nicely, dropping to a three-week low. In Washington, Federal Reserve chair Janet Yellen testifies before the Senate Budget Committee.

Canadian releases finally pointed upwards on Thursday, as Housing Starts jumped to 195 thousand, up from 157 thousand a month earlier. This easily beat the estimate of 177 thousand. Earlier in the week, Building Permits posted a 3.5% decline, well off the estimate of a gain of 3.9%. On Tuesday, Trade Balance slid to $0.1 billion, missing the estimate of $0.4 billion. Ivey PMI also disappointed, dropping to 54.1 points, a four-month low. The estimate stood at 54.5 points.

US Unemployment Claims rebounded last week, as the key indicator dipped to 319 thousand. This beat the estimate of 328 thousand. The reading follows last week’s excellent Nonfarm Payrolls and Unemployment Claims, as the US employment picture appears to have brightened. If employment numbers continue to improve, we can expect the Fed to continue tapering its QE scheme.

Federal Reserve Chair Janet Yellen testified before Congress’ Economic Joint Committee on Wednesday, and gave a cautious thumbs-up to the economic recovery. She said that the economy has improved, but pointed to two sore spots – the job market remains weak and inflation is below the Fed’s target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue for a “considerable time”. Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future trims to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.

USD/CAD for Thursday, May 8, 2014

USD/CAD May 8 at 15:05 GMT

USD/CAD 1.0863 H: 1.0903 L: 1.0861

USD/CAD Technical

• USD/CAD has lost ground on Wednesday. The pair pushed above the 1.09 line in the Asian session but then retracted.
• On the downside, 1.0852 is under strong pressure. Will the pair break below this line? This is followed by a stronger support line at 1.0775.
• 1.0906 is the next resistance line. This is followed by the key line of 1.10.
• Current range: 1.0852 to 1.0906

Further levels in both directions:

• Below: 1.0852, 1.0775, 1.0706, 1.0678
• Above: 1.0906, 1.10, 1.1094, 1.1177 and 1.1319

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions in Thursday trading, reversing the trend seen a day earlier. This is reflected in the movement of the pair, as the Canadian dollar has posted gains. The ratio has a majority of long positions, indicative of a trader bias in favor of the US dollar changing directions and moving to higher ground.

The pair is trading in the mid-1.08 range on Thursday. In the North American session, the US dollar is under pressure.

USD/CAD Fundamentals

• 12:13 Canadian Housing Starts. Estimate 177K. Actual 195K.
• 12:30 Canadian New Housing Price Index. Estimate 0.2%. Actual 0.2%.
• 12:30 US Unemployment Claims. Estimate 328K. Actual 319K.
• 13:30 US Federal Reserve Chair Janet Yellen Testifies Before Senate Budget Committee.
• 13:30 US FOMC Member Daniel Tarullo Speaks.
• 14:30 US Natural Gas Storage. Estimate 71B. Actual 74B.
• 17:01 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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