USD/CAD – Little Change After Solid US, Canadian Releases

USD/CAD is rangebound in Friday’s European session, as the pair continues to trades in the mid-1.02 range. The pair showed little change after a string of key releases on Thursday, as both US and Canadian data was positive. There are no Canadian or US releases scheduled for Friday, as we wrap up the trading week.

US numbers continue to look solid, as the US recovery shows more signs of deepening. Unemployment Claims were up slightly to 332 thousand, but easily beat the estimate of 343 thousand. More importantly, it was the fourth consecutive week that the key employment indicator has been better than expectations. There was good news as well from the manufacturing sector, as the Philly Fed Manufacturing Index climbed to 2.0 points, beating the estimate of -1.6 points. Existing Home Sales was up slightly from the February reading to 4.98 million, but fell short of the estimate of 5.02 million. Canadian releases also were positive, as Core Retail Sales, a key indicator, climbed to 0.5%, just above the estimate of 0.4%. Retail Sales looked even sharper, posting a 1.0% gain, well above the estimate of 0.6%. Both consumer spending indicators rebounded nicely after posting declines in the February releases. There were no surprises from the US Federal Reserve, which wrapped up a two-day policy meeting on Wednesday. The Fed announced that it was maintaining interest rates as well as the current round of asset purchases. The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. There had been talk of the Fed modifying its monetary policy, with the US economy shown signs of improvement, such as lower unemployment and stronger consumer spending. However, Fed chief Bernanke said that the US labor market was still weak and also noted concern about recent tax increases and federal spending cuts.

Back in Canada, the government released the federal budget on Thursday. Finance Minister Jim Flaherty stated that the government plans to eliminate the federal deficit by 2015. To achieve this target, the government is relying on stronger economic growth rather than spending cuts. With a current deficit of $25.9 billion for the present fiscal year, this is an ambitious goal. If the markets see improved growth and a smaller deficit, the Canadian dollar is likely to improve as a result.

The latest Eurozone financial crisis is centered on Cyprus, one of the Eurozone’s smallest members. Last weekend, Cyprus signed onto a 10 billion euro bailout package, courtesy of the EU and IMF. Under the agreement, all bank deposits would be taxed, between 6-10%, depending on the size of the bank deposit. This tax was supposed to raise about 6 billion euros. Cypriots were outraged, and on Tuesday, parliament voted overwhelmingly against the bailout deal, despite the government’s pleas that rejecting the agreement could lead to a bank collapse. The ECB shot back, and has threatened to stop providing emergency liquidity to Cypriot banks as of Monday, unless an agreement is reached for a new rescue package. So who will blink first – struggling Cyprus or the ECB? Without these funds, Cyprus could experience a financial meltdown, and there is even talk of the island country exiting from the Eurozone if the parties cannot hammer out an agreement.

USD/CAD for Friday, March 22, 2013

1.0240 H: 1.0265 L: 1.0237

USD/CAD is currently marked by narrow range trading, as the pair trades in the mid-1.02 range. The pair is receiving support at 1.0229. This weak line could be tested if the Canadian dollar posts more gains. The next support level is at 1.0157. On the upside, the pair is facing resistance at 1.0361. This is followed by resistance at 1.0446.

• Current range: 1.0229 to 1.0282.

Further levels in both directions:

• Below: 1.0229, 1.0157, 1.01, 1.0041 and 1.00
• Above: 1.0282, 1.0361, 1.0446 and 1.0523

OANDA’s Open Position Ratios

USD/CAD ratio has been shifting directions throughout the week, and this trend is continuing in Friday trading. The ratio is pointing to movement towards short positions. This is not reflected in the current movement of the pair, which is showing subdued activity. Short positions have a commanding majority in the ratio, indicating trader sentiment biased towards the Canadian dollar improving against the US currency.

USD/CAD is rangebound, as the pair shrugged off strong economic numbers out of both the US and Canada on Thursday. With no economic releases today, we  can expect the pair to trade quietly in the mid-1.02 range right up to the weekend.

USD/CAD Fundamentals

• There are no Canadian or US releases scheduled on Friday.

*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.