USD/CAD – Pair Stays Close to Parity as Markets Await Key US Data

USD/CAD is showing more movement on Friday, as the pair continues to stay close to the parity line. The US dollar lost some ground in Thursday’s North American session, but has since recovered much of those losses, and was trading just below parity.  The markets will be hoping for some positive news out of the US after some weak releases earlier this week. There are three key releases on Friday – Non-Farm Employment Change, the Unemployment Rate, and ISM Manufacturing PMI. There are no Canadian releases on Friday.

The Canadian dollar reached the parity line for the first time in a week after positive Canadian data and disappointing numbers out of the US earlier this week. The markets got a jolt after a dismal US GDP reading, as the economy declined by 0.1% in Q4. Although a very modest loss, there is bound to be negative market reaction, as this was the first decline since 2009, and the markets had anticipated a 1.1% gain. This was followed by Unemployment Claims, which was a major disappointment. For the first time in four weeks, the number of new claims rose, reaching 368 thousand. This was higher than the market forecast, which stood at 362 thousand.  In Canada, the monthly GDP posted a modest gain of 0.3%, good enough to beat the estimate, which stood at 0.2%. This was the key indicator’s best performance since June. The markets will be hoping that the modest improvement indicates that the Canadian economy is headed in the right direction. In the US, the trading week wraps up with key employment and manufacturing data. If the readings are not to the market’s liking, we could see some volatility from USD/CAD.

The US Federal Reserve was in the spotlight for much of the week, as the markets were poised to react to any new developments. However, there was not much excitement after the two-day policy meeting wrapped up, as the Fed chose to stay the course. The Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. It noted that economic growth had stalled, but was confident that the pause was a temporary one. This laid to rest speculation that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, might be terminated anytime soon. As expected, the Fed maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment close to 8%, we will likely be hearing this refrain for the foreseeable future.

USD/CAD for Friday, February 1, 2013

USD/CAD February 1 at 12:00 GMT

0.9992 H: 1.00 L: 0.9967

USD/CAD Technical

USD/CAD continues to trade close to the parity line. Currently the pair is just below the important threshold. The pair faces resistance just above parity, at 1.0003. This line has shifted from its support role earlier in the week. On the downside, there is support at 0.9954. This is followed by strong support at 0.9898.

Current range: 99.54 to 1.0003.

Further levels in both directions:

• Below: 0.9954, 0.9898, 0.9833, 0.9809 and 0.9767.
• Above: 1.0003, 1.0041, 1.01, 1.0157, 1.0207, 1.0286, 1.0365 and 1.0443.

OANDA’s Open Position Ratios

USD/CAD ratio is showing strong movement in favor of long postions. This is not currently reflected in the pair, as it hovers close to the parity line. However, further movement in this direction could be an indication that the pair will break out with an upward move.

After being pushed across the parity line late last week, the Canadian dollar has pushed back, and the pair finds itself slightly below parity. We could see USD/CAD show some volatility if there are any unexpected readings from today’s key releases, which includes US employment and manufacturing numbers.

USD/CAD Fundamentals

• 13:30 US Unemployment Rate. Estimate 7.8%.
• 13:30 US Non-Farm Employment Change. Estimate 161K.
• 13:30 US Average Hourly Earnings. Estimate 0.2%.
• 13:30 US FOMC Member William Dudley Speaks.
• 14:00 US Final Manufacturing PMI. Estimate 56.1 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 71.4 points.
• 14:55 US Revised UoM Inflation Expectations.
• 15:00 US ISM Manufacturing PMI. Estimate 50.8 points.
• 15:00 US Construction Spending. Estimate 0.6%.
• 15:00 US ISM Manufacturing Prices. Estimate 56.3 points.
• All Day: US Total Vehicle Sales. Estimate 15.2M

*Key releases are highlighted in bold

*All release times are GMT

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