USD/CAD – Volatile After Strong Unemployment Claims

On Thursday, USD/CAD showed strong movement, dropping sharply but then recovering. In the North American session, the pair is trading in the mid-1.11 range. US Unemployment Claims looked solid, dropping to 287 thousand, down from 293 thousand a month earlier. The news was not all good, as Factory Orders plunged by 10.1%. There are no Canadian events on Thursday.

In the US, employment numbers are showing improvement. US Unemployment Claims dropped to 287 thousand, beating the estimate of 299 thousand. ADP Nonfarm Payrolls surprised with a strong gain, climbing to 213 thousand, compared to 204 thousand in the previous release. This beat the estimate of 207 thousand. The ADP release precedes the official NFP release, which will be published on Friday. The markets are anticipating a sharp gain, with an estimate of 216 thousand. If the indicator does follow suit with a solid reading, the US dollar could post further gains against its major rivals.

On the manufacturing and housing fronts, this week’s US numbers were disappointing. ISM Manufacturing PMI fell to 56.6 points, down from 59.0 points a month earlier. US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. On Friday, we’ll get a look at ISM Non-Manufacturing PMI, with the markets braced for a softer reading for September.

The Canadian dollar has been no match for the juggernaut US dollar, losing about 200 points last week. The loonie has stabilized since then, but remains under pressure. The currency didn’t get any help as Canadian GDP posted a flat 0.0%, down from the previous release of 0.3%. Canadian GDP is released monthly, unlike most other developed countries which post GDP on a quarterly basis. The key indicator fell short of the estimate of 0.2% and this could put more pressure on the shaky Canadian dollar. Meanwhile, Canadian inflation levels remain listless, as the Raw Materials Price Index came in at -2.2%, marking its third decline in four readings.

USD/CAD for Thursday, October 2, 2014

USD/CAD October 2 at 14:55 GMT

USD/CAD 1.1147 H: 1.1164 L: 1.1072

USD/CAD Technical

• USD/CAD posted sharp losses in the Asian session, breaking below support at 1.124. The pair then changed directions, and continued moving upwards in the European session.  The pair is choppy in North American trade.
• 1.1124 is providing weak support. 1.1004 is stronger.
• 1.1278 is a strong resistance line. It has remained intact since March.
• Current range: 1.1124 to 1.1278

Further levels in both directions:

• Below: 1.1124, 1.1004, 1.0961, 1.0852 and 1.0775
• Above: 1.1278, 1.1414, 1.1493 and 1.1669

OANDA’s Open Positions Ratio

USD/CAD ratio is almost unchanged on Thursday. This is reflective of the lack of net movement by the pair, although it has showed strong activity during the day. The ratio has a majority of short positions, indicating trader bias towards the Canadian dollar moving to higher ground.

USD/CAD Fundamentals

• 12:30 US Unemployment Claims. Estimate 299K. Actual 287K.
• 14:00 US Factory Orders. Estimate -9.4%. -10.1%.
• 14:30 US Natural Gas Storage. Estimate 107B. Actual 112B.

* Key releases are in highlighted 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.