USD/CAD- Greenback Edges Higher, Crosses Above 1.02

The US dollar continues to post gains against the Canadian currency. The pair has been testing the 1.02 level, and is trading slightly above that line early in Tuesday’s North American session. Taking a look at economic releases, today’s US releases, Building Permits and Core CPI, matched the forecast. Housing Starts improved, but fell short of the estimate. There are no Canadian releases on Tuesday.

US releases were mostly within expectations on Tuesday. Building Permits came in at 0.97 million, just shy of the estimate of 0.98 million. Core CPI rose slightly to 0.2%, matching the forecast. CPI also came in exactly as expected, at 0.1%. The only disappointment was Housing Starts, which remained unchanged at 0.91 million. This was short of the estimate, which stood at 0.95 million.

All eyes will be glued to the US Federal Reserve on Wednesday, as the FOMC releases a highly anticipated policy statement. The markets will be particularly interested in what the Fed has to say with regard to its quantitative easing program. Speculation has been growing that the Fed could scale back QE later in the year, and this has had a very strong impact on stocks, commodities and the US dollar. The Federal Reserve has repeatedly stated that it will stick with the current program until it sees an improvement in the US economy, especially in the employment market. Currently the Fed purchases $85 billion in assets every month. If the Fed does take action or even hint at a move to tighten QE, we can expect the dollar to move higher against the major currencies.

G8 summits are often photo-ops with little substance, as confident world leaders step up to the microphones and declare their unwavering commitment to take steps to improve the global economy. However, this year’s G8 meeting in Northern Ireland served more than the usual fare, as the G8 leaders used the occasion to announce the start of negotiations on a free trade agreement between the European Union and the United States. The stakes are very high – the EU and US produce 50% of the global output, and a third of world trade. The deal would be the largest bilateral trade deal ever, and could add up to $100 billion to the economies of each partner. Negotiations will get underway in Washington next month, with a deal expected to be signed by the end of 2014. Canada has a free trade agreement with the US, and is presently negotiating a pact with the EU.

USD/CAD for Tuesday, June 18, 2013

USD/CAD 1.0208 H: 1.0214 L: 1.0177 

USD/CAD Technical

The US dollar continues to move upwards this week, and has pushed past the 1.02 line in Tuesday trading. USD/CAD continues to receive support at 1.0157. The next support level is at the round number of 1.01. On the upside, the pair faces resistance at 1.0229. This line could fall if the US dollar continues to make slow but steady progress against the loonie. This is followed by stronger resistance at 1.0282.

• Current range: 1.0157 to 1.0229

Further levels in both directions:

• Below: 1.0157, 1.01, 1.0058 and 1.00
• Above: 1.0229, 1.0282, 1.0337, 1.0442 and 1.0502

OANDA’s Open Positions Ratio

USD/CAD ratio has resumed movement after a lull on Monday. We are seeing movement towards short positions. This is not currently reflective of the pair’s movement, as the US dollar has posted gains against the loonie. The ratio continues to be split almost down the middle between long and short positions, indicating a lack of bias as to what direction the USD/CAD will take.

The Canadian dollar has enjoyed a great month of June, but this week has seen the US dollar push back and post gains against the Canadian currency. We could see the pair remain in a holding pattern while the markets wait for the FOMC statement on Wednesday.

USD/CAD Fundamentals

• 12:30 US Building Permits. Estimate 0.98M. Actual 0.97M.
• 12:30 US Core CPI. Estimate 0.2%. Actual 0.2%.
• 12:30 US CPI. Estimate 0.1%. Actual 0.1%.
• 12:30 US Housing Starts. Estimate 0.95M. Actual 0.91M.
• Day 2 of G8 Meetings.

*Key releases are highlighted in bold

*All release times are GMT

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