USD/CAD – US Dollar Firm After Positive Manufacturing Data

USD/CAD has posted modest gains on Tuesday, adding to gains it recorded on Monday. Late in the European session, the pair in the low-1.09 range. On the release front, it’s a quiet schedule, highlighted by Factory Orders. There are no Canadian releases on Tuesday.

It’s not often that a key indicator drops and magically recovers a day later. However, this was the case with ISM Manufacturing PMI. The well-respected ISM Business Survey Committee reported on Monday that the key index had softened in May, but has since corrected its reading. The index actually improved to 55.4 points in May, up from 54.9 points a month earlier. As well, Final Manufacturing PMI and ISM Manufacturing Prices improved. This points to an expanding manufacturing sector, which is good news for the recovery. The markets will be hoping for more good news from today’s highlight, Factory Orders.

Last week’s US numbers were a mix. Preliminary GDP, the primary gauge of economic activity, posted its first decline since Q2 of 2009. The indicator came in at -1.0% for Q1, worse than the estimate of -0.6%. Harsh winter conditions took their toll on the economy in Q1, and analysts expect a rebound in Q2. After a strong gain in March, Pending Home Sales softened, coming in at 0.4%. This was nowhere near the gain of 1.1%. On a brighter note, Employment Claims dropped to 300 thousand, easily beating the estimate of 321 thousand. As well, CB Consumer Confidence remains at high levels.

There were no surprises from Canadian GDP, which was released on Friday. The indicator is published monthly, unlike most major economies, which release GDP on a quarterly basis. The May release dipped to 0.1%, a three-month low. This matched the estimate, and USD/CAD did not react to this release. However, weak economic growth will likely weigh on the Canadian dollar, and the currency could lose ground if key Canadian releases fail to meet expectations.

USD/CAD for Tuesday, June 3, 2014

USD/CAD June 3 at 12:05 GMT

USD/CAD 1.0911 H: 1.0918 L: 1.0891

USD/CAD Technical

• There is resistance at the round number of 1.1000, a key level. This is followed by resistance at 1.1094.
• 1.0906 is under strong pressure on the downside as the US dollar has moved higher. 10852 is a stronger support level.
• Current range: 1.0906 to 1.1000

Further levels in both directions:

• Below: 1.0906, 1.0852, 1.0775, 1.0706 and 1.0678
• Above: 1.10, 1.1094, 1.1177 and 1.1278

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions in Tuesday trading. This is not consistent with the current movement of the pair, as the US dollar has edged higher. The ratio has a majority of long positions, indicative of trader bias in favor of the US dollar continuing to post gains.

USD/CAD continues to point upwards. The pair has edged higher in the European session.

USD/CAD Fundamentals

• 14:00 US Factory Orders. Estimate 0.6%.
• 14:00 IBD/TIPP Economic Optimism. Estimate 46.5 points.
• All Day – US Total Vehicle Sales. Estimate 16.0M.

*Key releases are highlighted in bold

*All release times are GMT

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