USD/CAD – Improving Canadian Dollar Shrugs Off Weak Canadian Data

USD/CAD has posted losses on Tuesday, as the Canadian dollar takes advantage of broad weakness from its US counterpart. Early in the North American session, the pair is trading just below the 1.09 line, the lowest level we’ve seen since in almost a month. The loonie was unaffected by weak Canadian releases on Tuesday, as Trade Balance and Ivey PMI both fell short of their estimates. In the US, Trade Balance met expectations.

Canadian releases failed to impress on Tuesday. Trade Balance slid to $0.1 billion, well short of the estimate of $0.4 billion. There was no relief from Ivey PMI, which dropped to 54.1 points, a four-month low. The estimate stood at 54.5 points. We’ll get a look at another key event on Wednesday, with the release of Building Permits.

US employment releases looked excellent on Friday. Nonfarm Payrolls jumped to 288 thousand, easily beating the estimate of 216 thousand. The Unemployment Rate kept pace, dropping to 6.3%, its lowest level since September 2008. At the same time, the participation rate in the labor force dropped, so slack remains in the US job market, despite the strong releases in April.

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

USD/CAD for Tuesday, May 6, 2014

USD/CAD May 6 at 14:40 GMT

USD/CAD 1.0896 H: 1.0961 L: 1.0890

USD/CAD Technical

• USD/CAD has posted gains on Tuesday. The pair broke below the 1.09 line early in the North American session.
• 1.0906 is providing support. This is followed by a support line at 1.0852, which has held since January.
• On the upside, 1.0906 has reverted to a resistance role. This is a weak line which could see further action during the day. There is stronger resistance at the key level 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 long positions in Tuesday trading. This is not 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 reversing directions and moving to higher ground.

The US dollar is broadly lower and has lost ground to the Canadian dollar on Tuesday. In the North American session, the US dollar remains under strong pressure.

USD/CAD Fundamentals

• 12:30 Canadian Trade Balance. Estimate 0.4B. Actual 0.1B.
• 12:30 US Trade Balance. Estimate -40.1B. Actual -40.4B.
• 14:00 Canadian Ivey PMI. Estimate 54.5 points. Actual 54.1 points.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 47.6 points. Actual 45.8 points.
• 21:30 US FOMC Member Jeremy Stein Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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