USD/CAD – Rangebound as Canada, US Post Solid Numbers

USD/CAD continues to trade in a narrow range in Thursday trading. The pair was trading in the 1.0070 range early in the North American session. In the US, there was good news as the Trade Balance and Unemployment Claims beat expectations. Canadian numbers also looked good, as Trade Balance was better than the estimate. In Europe, the ECB lowered interest rates from 0.75% to 0.50%. This move was widely expected, but could have an effect on the currency markets.

It’s been a turbulent week for US releases. Wednesday was a bust, as ADP Non-Farm Payrolls dropped to 119 thousand, well off the estimate of 154 thousand. The ISM Manufacturing PMI came in at 51.7 points. However, Thursday’s releases looked much better. The Trade Deficit narrowed  to $38.8 billion, well below the estimate of $42.1 billion. Unemployment Claims fell to 324 thousand, easily beating the estimate of 346 thousand. In Canada, Trade Balance improved from a $1.0 billion deficit to a clean slate at $0.0B. The markets had anticipated a deficit of $0.7B.

Anyone who was expecting some dramatic news out of the Fed on Wednesday was sorely disappointed. The FOMC policy statement on Wednesday said little, as the Fed basically noted that it wasn’t willing to take further steps, despite signs of weakness in the US economy. There was no indication that the Fed would make any changes (higher or lower) to its current QE program of purchasing $85 billion in assets each month. The Fed did criticize the government’s economic policy, stating that current fiscal policy was restraining economic growth. Meanwhile, the continues to struggle with weak numbers, and Wednesday’s ADP Non-Farm Payrolls was a bust. The key indicator dropped to 119 thousand, nowhere near the forecast of 154 thousand. ISM Manufacturing PMI came in at 50.7 points, missing the estimate of 51.0 points. We’ll get a better picture of the US employment picture as the US official US Non-Farm Payrolls and the Unemployment Rate on Friday.

Under the new leadership of Governor Haruhiko Kuroda, the Bank of Japan has been pushing full steam ahead with aggressive monetary easing, but it seems that not all policy makers share his enthusiasm. The BOJ released the minutes of its most recent policy meeting. The minutes pointed to concern by some policy board members that the increase in QE could have a negative impact on financial markets and discourage bank lending. However, given that Prime Minister Abe is a strong supporter of more easing, we can expect the BOJ to continue its present QE program until it sees more inflation in the Japanese economy.

 USD/CAD for Thursday, May 2 2013

1.0071 H: 1.0090 L: 1.0059

USD/CAD Technical

USD/CAD is showing little change in Thursday trading. The pair continues to face resistance at the round number of 1.01. This is a weak line, and could face pressure if the US dollar breaks out. This is followed by stronger resistance at 1.0157. On the downside, there is weak support at 1.0041. The next support level is at the all-important parity level.

Current range: 1.0041 to 1.01

Further levels in both directions:

• Below: 1.0041, 1.00 and 0.9930.
• Above: 1.01, 1.0157, 1.0229, 1.0282 and 1.0361

OANDA’s Open Position Ratios

USD/CAD has been movement towards long positions. We are not seeing this currently from the pair, which is very quiet. However, this activity could be an early sign of a breakout by USD/CAD in an upwards direction. Long positions have increased their majority of the open positions in the ratio, indicating a strong bias towards the US dollar improving against the loonie.

The Canadian dollar has settled down after posting strong gains recently against the US dollar. With the US releasing more key employment numbers on Friday, we could see some action from the pair before the weekend.

USD/CAD Fundamentals

• 11:30 US Challenger Job Cuts. Actual -6.0%
• 12:30 Canadian Trade Balance. Estimate -0.7B. Actual 0.0B.
• 12:30 US Trade Balance. Estimate -42.1B. Actual -38-8B.
• 12:30 US Unemployment Claims. Estimate 346K. Actual 324K.
• 12:30 US Preliminary Non-Farm Productivity. Estimate 1.8%. Actual 0.7%.
• 12:30 US Preliminary Unit Labor Costs. Estimate 0.8%. Actual 0.5%.

*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.