USD/CAD – Improving Loonie Shrugs off Weak Inflation Figures

The Canadian dollar has posted further gains on Wednesday, as USD/CAD trades in the mid-1.11 range in the North American session. The Canadian dollar has enjoyed a strong week, gaining about 100 points against its US counterpart. On the release front, Canadian inflation numbers disappointed, as the Raw Materials Price Index posted a decline of 1.8% last month. In the US, the markets are keeping an eye on the FOMC policy meeting, which ends later in the day. The Fed will issue a policy statement and is widely expected to wind up its QE program.

The Canadian dollar shrugged off weak inflation data on Wednesday. The Raw Materials Price Index dropped 1.8%, its third straight decline. The indicator fell short of the forecast of -0.8%. The Industrial Product Price Index followed suit, coming in at -0.4%, coming in shy of the estimate of 0.0%. Like its southern neighbor, Canada has not been able to shake off low inflation levels, which point to ongoing slack in the economy.

In the US, durable goods looked dismal in September. Core Durable Goods Orders dropped 0.2%, its second decline in three months. This was well short of the estimate of 0.5%. Durable Goods Orders followed suit with a decline of -1.3%. This was the indicator’s second straight decline and missed the estimate of 0.4%. There was much better news from CB Consumer Confidence, as the indicator climbed to 94.5 points, up sharply from 86.0 points. The easily beat the estimate of 87.4 and marked a 7-year high.

The Federal Reserve will be in the spotlight on Wednesday as the US central bank releases its monthly statement. It is widely expected that the Fed will wind up its stimulus scheme, which has been in place since September 2012. Such a symbolic step would mark a vote of confidence in the economy from the powerful Fed. The markets will also be looking for hints regarding the timing of a rate hike, which is expected sometime in 2015. The Fed has noted its concern about the lack of growth in Europe, and a slowdown in China could put a rate hike on hold. Traders should treat the FOMC policy statement as a market-mover which could have a significant impact on the currency markets.

USD/CAD for Wednesday, October 29, 2014

USD/CAD October 29 at 15:25 GMT

USD/CAD 1.1141 H: 1.1172 L: 1.1122

USD/CAD Technical

• USD/CAD was flat in the Asian session. The pair posted gains in European trade, testing support at 1.124. USD/CAD is stable in the North American session.
• 1.1124 is an immediate support level.
• On the upside, 1.1278 has strengthened as the Canadian dollar continues to gain ground.
• Current range: 1.1124 to 1.1278

Further levels in both directions:

• Below: 1.1124, 1.1004, 1.0961 and 1.0865
• Above: 1.1278, 1.1414, 1.1493 and 1.1669

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains on Wednesday. This is not consistent with the movement of the pair, as the Canadian dollar has posted gains. The ratio has a majority of short positions, indicating trader bias towards the Canadian dollar continuing to move to higher ground.

USD/CAD Fundamentals

• 12:30 Canadian Raw Materials Price Index. Estimate -0.8%. Actual -1.8%.
• 12:30 Canadian Industrial Product Price Index. Estimate 0.0%. Actual -0.4%.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.

* Key releases are in highlighted bold.

*All release times are GMT

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