USD/CAD – Higher Ahead of US Employment Data

The Canadian dollar continues to travel south, as USD/CAD trades in the low-1.09 range on Friday. In the US, the markets will have plenty of data to sort through, with three key events later in the day – Nonfarm Employment Change, Unemployment Rate and ISM Manufacturing PMI. We’ll also get a look at consumer confidence levels, with the release of UoM Consumer Sentiment. There are no Canadian releases on Friday.

Unemployment Claims came in at 302 thousand on Thursday, higher than the previous release but very close to the estimate of 303 thousand. Earlier in the week, ADP Nonfarm Payrolls posted a sharp drop. If the official NFP release follows suit and misses the estimate of 234 thousand, the US dollar could give up some if its recent gains. Meanwhile, US GDP exceeded expectations in the second quarter, as the economy expanded at an annual rate of 4.0%. This easily beat the estimate of 3.1% and marked the strongest quarter of economic growth since Q4 in 2009. The boost in economic activity was helped by strong consumer confidence and business investment, as well as solid employment data.

The Federal Reserve released a policy statement on Wednesday, with the Fed sounding somewhat dovish in tone. Policymakers acknowledged lower unemployment levels, but noted that “there remains significant underutilization of labor resources” in the economy. The Fed statement reinforces the view that the US central bank is in no rush to raise interest rates after the termination of QE, which is expected in October. As well, the Fed said that inflation levels have moved somewhat closer to the Fed’s target of 2.0%.

The Canadian dollar has had a rough week, losing about 140 points and trading at its lowest levels since early June. The loonie showed signs of life on Thursday, courtesy of unexpected positive news from Canadian GDP. The key indicator rose 0.4% in June, edging above the estimate of 0.3%. However, it didn’t take long for the US dollar to recover, as USD/CAD is back above the 1.09 line.

USD/CAD for Friday, August 1, 2014

USD/CAD August 1 at 11:45 GMT

USD/CAD 1.0929 H: 1.0944 L: 1.0906

USD/CAD Technical

• USD/CAD has been edging upwards in the Asian and European sessions, as the Canadian dollar remains under pressure.
• 1.0961 is an immediate resistance line. 1.1004 is stronger.
• 1.0852 has some breathing room as the pair trades at higher levels.
• Current range: 1.0852 to 1.0961

Further levels in both directions:

• Below: 1.0852, 1.0775, 1.0678 and 1.0572
• Above: 1.0961, 1.1004, 1.1124 and 1.1278

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions in Friday trade, continuing the movement we saw a day earlier. This is not consistent with the pair’s movement, as the Canadian dollar continues to lose ground. The ratio is evenly split between long and short positions, indicative of a lack of trader bias regarding what direction the pair will take.

USD/CAD Fundamentals

• 12:30 US Nonfarm Employment Change. Estimate 231K.
• 12:30 US Unemployment Rate. Estimate 6.1%.
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 12:30 US Core PCE Price Index. Estimate 0.2%.
• 12:30 US Personal Spending. Estimate 0.5%.
• 12:30 US Personal Income. Estimate 0.4%.
• 13:45 US Final Manufacturing PMI. Estimate 56.3 points.
• 13:55 US Revised UoM Consumer Sentiment. Estimate 81.5 points.
• 13:55 US Revised UoM Inflation Expectations.
• 14:00 US ISM Manufacturing PMI. Estimate 56.1 points.
• 14:00 US Construction Spending. Estimate 0.4%.
• 14:00 US ISM Manufacturing Prices. Estimate 58.6 points.
• All Day – US Total Vehicle Sales. Estimate 16.8M.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.