USD/CAD – Lower as Key US Numbers Impress Markets

The Canadian dollar has posted gains against its US counterpart on Thursday. The pair was trading in the mid-1.01 range early in the North American session. The Canadian dollar is now at its highest level since mid-May. In economic news, the markets got a look at the first major US releases this week, and the news was positive. In Canada, NHPI came in at 0.2%, just shy of the estimate of 0.3%. Capacity Utilization Rate rose to 81.1%, very close to the forecast of 81.3%.

It’s been a quiet week up until now for US events, but that changed on Thursday, as the US posted three key releases. Retail Sales jumped from 0.1% to 0.6%, surpassing the estimate of 0.4%. Core Retail Sales also climbed nicely, from -0.1% to 0.3%. This matched the market forecast.  There was more good news as Unemployment Claims fell to 334 thousand, crushing the estimate of 354 thousand. If the US can put together additional solid numbers, it could be a sign that the recovery is deepening.

There was some good news for the US from the S&P ratings agency on Monday, as the well-respected firm revised the US sovereign credit rating from negative to stable. This is an important vote of confidence in the US economy, and means that there is less than a 1 in 3 chance of another downgrade in the next two years. S&P noted that a key factor in its revision was the agreement reached in the US Congress which averted the fiscal cliff crisis, which would have led to $600 billion in automatic tax increases and spending cuts and could have pushed the fragile US economy into recession. In 2011, S&P cut the US credit rating from AAA to AA, and the threat of another downgrade has been a concern of the markets. This news will likely improve market sentiment and could give a boost to the US dollar.

The S&P decision could also affect the US Federal Reserve’s QE program, which involves the purchase of $85 billion in assets each month. The Fed has said that it won’t scale back the program before it sees a stronger economy and an improving employment picture. Although US releases continue to be mixed, speculation is rising that the Fed could take action in the next few months. Since QE is US dollar-negative, any tapering of QE could give a boost to the greenback and jolt the currency markets.

USD/CAD for Thursday, June 13, 2013

USD/CAD 1.0167 H: 1.0227 L: 1.0151

USD/CAD Technical

USD/CAD is back below the 1.02 level, as the pair has retracted in the mid-1.01 range. USD/CAD continues to receive support at 1.0157, but this is a weak line, and could fall at any time. The next support level is at the round number of 1.01. On the upside, the pair continues to face resistance at 1.0229. This is followed by a resistance line at 1.0282.

• Current range: 1.0157 to 1.0229

Further levels in both directions:

• Below: 1.0157, 1.01, 1.0058 and 1.00
• Above: 1.0229, 1.0282, 1.0337, 1.0442 and 1.0502

OANDA’s Open Positions Ratio

USD/CAD ratio has finally shown some movement after a very quiet week. The ratio is pointing to movement towards long positions. We are not seeing this reflected in the pair’s current movement, as the Canadian dollar has posted gains against the US currency. The ratio is close to an even split, indicating a lack of bias as to what to expect from USD/CAD.

The Canadian dollar has taken advantage of the US dollar’s broad weakness, as the currency has gained about two cents this week. We can expect some movement from the pair on Friday, as both Canada and the US post major releases.

USD/CAD Fundamentals

• 12:30 Canadian NHPI. Estimate 0.3%. Actual 0.2%
• 12:30 Canadian Capacity Utilization Rate. Estimate 81.3%. Actual 81.1%
• 12:30 US Core Retail Sales. Estimate 0.3%. Actual 0.3%
• 12:30 US Retail Sales. Estimate 0.4%. Actual 0.6%
• 12:30 US Unemployment Claims. Estimate 354K. Actual 334K 
• 12:30 US Import Prices. Estimate 0.0%. Actual -0.6%
• 14:00 US Business Inventories. Estimate 0.3%. Actual 0.3%
• 14:30 US Natural Gas Storage. Estimate 96B.
• 17:00 US 30-year Bond Auction

*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.