USD/CAD – Volatile after Release of US, Canadian Data

USD/CAD has edged lower in Thursday trading. The pair dropped as low as the 1.02 line, but has bounced higher, and was trading in the mid-1.02 range. In the US, there were no surprises from the Federal Reserve, which maintained interest rates and QE at their current levels. US employment numbers continue to look sharp, as Unemployment Claims beat expectations. Canadian releases also looked solid, as Retail Sales and Core Retail Sales beat their estimates. The markets will be looking for more good news from today’s other key releases- Existing Home Sales and the Philly Fed Manufacturing Index.

There were no surprises from the US Federal Reserve, which wrapped up a two-day policy meeting on Wednesday. The Fed announced that it was maintaining interest rates as well as the current round of asset purchases. The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. There had been talk of the Fed modifying its monetary policy, with the US economy shown signs of improvement, such as lower unemployment and stronger consumer spending. However, Fed chief Bernanke said that the US labor market was still weak and also noted concern about recent tax increases and federal spending cuts. Meanwhile, US employment data continues to impress. Unemployment Claims were up slightly to 332 thousand, but easily beat the estimate of 343 thousand. More importantly, it was the fourth consecutive week that the key employment indicator has been better than expectations. The news was not as positive from Flash Manufacturing PMI, which came in at 54.9 points, slightly below the forecast of 55.1. Canadian releases also were positive, as Core Retail Sales, a key indicator, climbed to 0.5%, just above the estimate of 0.4%. Retail Sales looked even sharper, posting a 1.0% gain, well above the estimate of 0.6%. Both consumer spending indicators rebounded nicely after posting declines in the February releases.

Taking a look at events in Europe, Cyprus may be one of the Eurozone’s lightweights, but it continues to be in the financial headlines. What was supposed to be a routine bailout package for the island country has ballooned into a full-blown Eurozone financial crisis. The reason was a controversial bank levy provision in the agreement, which sent the currency markets spinning early in the week. This tax, which was aimed at all bank deposit holders, was intended to raise 5.8 billion euros, which would be a condition for Cyprus receiving the bailout funds. Cypriots were outraged, and on Tuesday, the Cypriot parliament voted overwhelmingly against the bailout. The government was not happy with the deal either, but had warned that rejecting the agreement could lead to a collapse of the nation’s banking sector. Meanwhile, the Eurozone is scrambling to salvage the bailout deal. German Chancellor Angela Merkel said she was ready to work with Cyprus to find a solution, and officials from the EU and IMF, who are the creditors behind the bailout, are in Cyprus for talks with the Cypriot government to discuss ways of making the bailout more palatable.

USD/CAD for Thursday, March 21, 2013

1.0240 H: 1.0258 L: 1.0201

USD/CAD Technical 

USD/CAD is showing a lot of activity in the Thursday session, as USD/CAD trades in the mid-1.02 range. The pair is receiving support at 1.0229. This is a weak line, and could see more activity if the Canadian dollar moves higher. The next support level is at 1.0157. On the upside, the pair is facing resistance at 1.0282. This is followed by resistance at 1.0361, which has remained intact since last June.

• Current range: 1.0229 to 1.0282

Further levels in both directions:

• Below: 1.0229, 1.0157, 1.01, 1.0041 and 1.00
• Above: 1.0282, 1.0361, 1.0446 and 1.0523

OANDA’s Open Position Ratios

USD/CAD ratio is active in Thursday trading, and pointing to movement towards short positions. This is consistent with what we are seeing from the pair, as the Canadian dollar has posted gains against the US currency. Short positions enjoy a commanding majority of open positions, indicating that trader sentiment is strongly biased towards the Canadian dollar strengthening and posting more gains against the greenback. 

USD/CAD is showing some volatility, which is not unusual after the release of key indicators from both Canada and the US earlier today. With key US housing and consumer confidence numbers still to come, we could see the pair continue to fluctuate.

USD/CAD Fundamentals

• 12:30 Canadian Core Retail Sales. Estimate 0.4%. Actual 0.5%
• 12:30 Canadian Retail Sales. Estimate 1.0%. Actual 0.6%
• 12:30 US Unemployment Claims. Estimate 343K. Actual 336K
• 13:00 US Flash Manufacturing PMI. Estimate 55.1 points. Actual 53.9 points
• 13:00 US HPI. Estimate 0.7%. Actual 0.6%
• 14:00 US Existing Home Sales. Estimate 5.02M
• 14:00 US Philly Fed Manufacturing Index. Estimate -1.6 points
• 14:00 US CB Leading Index. Estimate 0.3%
• 14:30 US Natural Gas Storage. Estimate -70B

*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.