USD/CAD – US Dollar Edges Higher as Markets Return to Action

USD/CAD started the week on a very quiet note as the US markets were closed on Monday. The US dollar has edged up on Tuesday, as the pair trades in the high-1.03 range early in the North American session. The markets will get their first look at key US data later in the day, with the release of CB Consumer Confidence. There are no Canadian releases on Tuesday.

Canadian releases disappointed last week, and the Canadian dollar paid the price. Core Retail Sales slipped badly, dropping from 0.7% to -0.2%. This marked a three-month low for the key indicator. Retail Sales brought no relief, as the indicator slid from 0.8% to 0.0%. The markets had expected a 0.2% gain. These readings point to weakness in consumer spending, a key engine of economic growth. The US dollar took advantage of these numbers, and tested the 1.04 level last week. Will the pair break above the 1.04 barrier this week?

The US Federal Reserve continues to be in the spotlight, as the markets speculate that the Fed could wind up the current round of QE earlier than expected. Last week, Fed Chair Bernard Bernanke testified before a Congressional committee. Bernanke initially stated that tightening monetary policy could hurt the US recovery. However, he later said that a decision to scale back QE could be taken in the “next few meetings” if the US economy improves. The bottom line? The Fed is not making any changes to its monetary policy just yet, but that could change if the US economy improves, inflation rises and unemployment falls.

The markets are accustomed to ups and downs in US numbers, which has typified US releases in 2013. Last week saw mixed housing numbers, as Existing Home Sales missed the estimate, but New Home Sales looked very sharp. Unemployment Claims bounce back with a strong release, and the week ended with a rise in Core Durable Goods Orders. The mix of positive and weak releases churned out by the US has made it difficult to assess the extent of the economic recovery. This has resulted in the “wait and see” attitude of the Federal Reserve, which has said it will scale back QE if economic conditions improve. 

USD/CAD for Tuesday, May 28, 2013

USD/CAD 1.0325 H: 1.0375 L: 1.0375

USD/CAD Technical

USD/CAD has moved higher on Tuesday, and is within striking distance of the 1.04 line. The pair faces resistance at 1.0442. This line could face pressure if the US dollar can push above the 1.04 line. On the downside, there is support at 1.0337. There is stronger support at 1.0282.

• Current range: 1.0282 to 1.0337

Further levels in both directions:

• Below: 1.0337, 1.0282, 1.0229, 1.0157, 1.01 and 1.0041
• Above: 1.0442, 1.0502, 1.0658 and 1.0758

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to movement towards short positions. We are not seeing this movement from the pair at present, as the US dollar has posted some modest gains. Short positions make up a majority of the open positions, indicating a bias towards the Canadian dollar improving.

After a quiet start to the week, the US dollar continues to push towards the 1.04 line. We could see some volatility after the release of key consumer confidence data out of the US later today.

USD/CAD Fundamentals

• 13:00 US S&P/CS Composite-20 HPI.
• 14:00 US CB Consumer Confidence. Estimate. 70.7 points. 
• 14:00 US Richmond Manufacturing Index. Estimate 2 points.

*Key releases are highlighted in bold

*All release times are GMT

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