USD/CAD – Loonie Edges Higher, Eyes Parity

USD/CAD continues to trade close to the parity level. The Canadian dollar has improved slightly, and the pair was trading in the mid-1.00 range. In the US, the NFIB Small Business Index rose to 88.9 points, just shy of the estimate of 89.0 points. The Federal Budget Balance will be released later in the day, and the markets will be monitoring President Obama’s State of the Union address. Wednesday is busier, with the US releasing a host of indicators, including Core Retail Sales and Retail Sales. In Ottawa, BOC Governor Mark Carney will testify before the House of Commons Standing Committee on Finance. 

The Canadian dollar is trying to get back above parity, after last week’s “Black Friday,” in which Canadian employment and housing numbers crashed. Analysts have been saying that recent excellent Canadian employment numbers are not reflective of the Canadian economy, and Friday’s indicators appeared to drive that message home. Employment change was a disaster, as the indicator pointed to a loss of 21.9 thousand jobs. The markets had anticipated a gain of 4.5 thousand. Although the Unemployment Rate dropped from 7.2% to 7%, the markets were not impressed, as the improvement could well have resulted from many unemployed people simply giving up. One analyst summed up the bleak news by stating that “it does look like the labour market caught up with the slow-growth reality”. There was more bad news, as Housing Starts slumped to 161,000, its worst showing in three years. The estimate stood at 196 thousand. The data points to weakness in the economy, and the Canadian dollar has been struggling to climb back to parity.

The G-20 meeting will take place later this week in Moscow, and the markets will be keeping a close eye on the important international gathering. A hot topic on the agenda will be the issue of exchange rates. There has been a lot of volatility in currency rates lately – most notably, the sinking yen and the high-flying euro. There is mounting concern about currency wars, as countries increasingly rely on monetary policy to kick-start their flagging economies. Japan is facing criticism about its economic platform, which has helped the yen tumble in a hurry. The yen has shed 20% of its value since October, as the government continues with aggressive monetary stimulus to combat deflation and breathe life into the sluggish Japanese economy. Meanwhile, the Institute of International Finance, which is comprised of leading banks and financial institutions, has urged the G-20 to take steps to avoid the “possible discord on exchange rates”. However, given the need to reach a consensus, analysts expect any statement on currencies from the G-20 to be mild in nature.

USD/CAD for Tuesday, February 12, 2013

USD/CAD February 12 at 14:30 GMT

1.0042 H: 1.0087 L: 1.0036

The Canadian dollar has edged higher in Tuesday trading. On the downside, the pair is testing the 1.0041 line. There is stronger support at the parity line. On the upside, the pair is receiving support at 1.01. This line has stood firm against the US dollar, as the greenback pushed above it in January, but was unable to hold on. The next line of resistance is at 1.0157.

Further levels in both directions:

• Below: 1.0041, 1.00, 0.9954, 0.9898, 0.9833 and 0.9809
• Above: 1.01, 1.0157, 1.0207 and 1.0286

OANDA’s Open Position Ratios

The USD/CAD ratio is continuing Monday’s trend, as it points to strong movement towards short positions. We are seeing this movement in the pair as well, as the Canadian dollar edged higher, with an eye on the parity line. If the pair maintains its downward trend, we can expect the movement in the ratio to continue.

The Canadian dollar is showing slight improvement in Tuesday trading. Will it once again climb above parity? With little happening as far as economic releases, we can expect some modest movement by USD/CAD.

USD/CAD Fundamentals

• 13:45 Bank of Canada Governor Mark Carney Speaks.
• 12:30 NFIB Small Business Index. Estimate 89.0 points. Actual 88.9 points.
• 16:30 US FOMC Member Esther George Speaks.
• 19:00 US Federal Budget Balance. Estimate -4.6B.

*Key releases are highlighted in bold

*All release times are GMT

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