USD/CAD – Loonie Dips as US Services PMI Sparkles

The Canadian dollar has lost ground on Tuesday, as USD/CAD trades in the mid-1.09 range in the North American session. The pair is now at its highest level in eight weeks, with the key 1.10 level within striking distance. In the US, ISM Non-manufacturing PMI improved to 58.7 points, its best reading in seven years. As well, Factory Orders posted a strong gain of 1.1% in July. There are no Canadian releases on Tuesday.

PMIs are closely tracked by analysts, as they are important gauges of the health of key sectors in the economy. The ISM Non-manufacturing PMI, which surveys purchase managers in the services sector, jumped to 58.7 points, its best showing since June 2007. This easily beat the estimate of 56.6 points. This follows last week’s Manufacturing PMI, which also improved sharply in July. The strong PMIs have helped boost the US dollar and added to the woes of the shaky Canadian dollar, which finds itself dangerously close to the key 1.10 level.

Last week, the Federal Reserve released a policy statement, 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 Fed has remained vague as to when it will raise interest rates, but if the economy continues moving in the right direction, a rate increase is likely before mid-2105.

USD/CAD for Tuesday, August 5, 2014

USD/CAD August 5 at 14:35 GMT

USD/CAD 1.0945 H: 1.0952 L: 1.0906

USD/CAD Technical

• USD/CAD was flat in the Asian session, trading just above the 1.09 line. The pair gained ground in the European session and is steady in North American trading.
• 1.0961 remains an immediate resistance line and could break during the day. 1.1004 is stronger.
• 1.0852 is providing strong support.
• 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 Tuesday trade, continuing the movement we saw a day earlier. This is not consistent with the pair’s movement, as the Canadian dollar has lost ground. The ratio has a majority of short positions, indicative of trader bias towards the Canadian dollar reversing directions and moving higher.

USD/CAD Fundamentals

• 14:00 ISM Non-Manufacturing PMI. Estimate 56.6 points.
• 14:00 US Factory Orders. Estimate 0.6%.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points.

*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.