By Kenny Fisher
The Canadian dollar continues its losing ways, as USD/CAD has crossed above the 1.04 line in Thursday trading. The loonie has now surrendered about 140 points in the past two days. Taking a look at economic news, U.S. unemployment claims were a disappointment, missing market expectations. There are no Canadian releases on Thursday.
Another U.S. employment release, another disappointing result. Unemployment Claims dropped last week, falling from 358 thousand to 350 thousand. However, the markets were disappointed, having anticipated a result of 343 thousand. This release comes on the heels of a dismal Non-Farm Payrolls report, and does not bode well for the U.S. dollar, which is finding itself under pressure from the major currencies.
There were no surprises from the BOC on Wednesday, as the central bank maintained the benchmark interest rate at 1.00%. However, the BOC's rate statement stated that the country's level of economic activity is "lower than the Bank had been expecting", and there was no reference to the need for future rate hikes, which we've seen in previous rate statements. The BOC's growth forecast reflects a slowdown in the Canadian economy, with the forecast for 2013 downgraded from 1.8% to 1.6%, and the outlook for 2014 lowered from 2.7% to 2.3%.
There was some optimism and relief last week, as the Republicans and Democrats finally reached an agreement last week to reopen the government and raise the debt ceiling, following weeks of fighting in Congress. However, the deal provides short-term relief only - the government will be funded until January 15, while the debt limit will be raised until February 7. Both sides have agreed to discuss budget issues and try to reach a long-term agreement before December 13. So we could be right back where we started in just a few months. At the same time, the public is angry at lawmakers for creating the crisis, and with congressional elections only a year away, the politicians on Capitol Hill may think twice before plunging the country into another fiscal and political crisis.
The U.S. government is again functioning and a default has been averted, but the agreement hammered out in Congress last week provides short-term relief only, as it raises the debt ceiling until early February and funds the government until mid-January. The underlying budgetary issues remain unresolved, consumer confidence has been shaken and employment numbers are not looking good, as underscored by this week's Non-Farm Payrolls and Unemployment Claims. Given this situation, the Fed is unlikely to push the taper trigger until early 2014, perhaps as late as March or April.
USD/CAD for Thursday, October 24, 2013
USD/CAD October 24 at 15:15 GMT
USD/CAD 1.0437 H: 1.0431 L: 1.0367
- USD/CAD continues to hit higher ground on Thursday. The pair pushed across the 1.04 line and continues to move higher.
- The pair is facing resistance at 1.0442. This line has seriously weakened as the pair has shot higher and could fall during the North American session. There is a stronger support level at 1.0502.
- USD/CAD is receiving support at 1.0337. This line has some breathing room as USD/CAD has moved higher. This is followed by a support level at 1.0282.
- Current range: 1.0337 to 1.0442
Further levels in both directions:
- Below: 1.0337, 1.0282, 1.0224, 1.0158 and 1.0068
- Above 1.0442, 1.0502, 1.0573 and 1.0652
OANDA's Open Positions Ratio
USD/CAD ratio continues to point towards short positions in Thursday trading, a trend we have seen most of the week. This can be explained by the fact that the U.S. dollar has posted strong gains, leading to numerous long positions being covered. This has resulted in a larger percentage of open short positions. We are now seeing a majority of short positions in the ratio, indicating a bias towards the Canadian dollar reversing direction and moving higher.
The Canadian dollar continues to lose ground on Thursday and remains under pressure from the greenback. We could see the USD/CAD continue to post gains in the North American session.
- 00:30 Reserve Bank of Australia Deputy Governor Philip Lowe Speaks.
- 12:30 U.S. Trade Balance. Estimate -39.4B. Actual -38.8B.
- 12:30 U.S. Unemployment Claims. Estimate 343K. Actual 350K.
- 13:00 U.S. Flash Manufacturing PMI. Estimate 52.8 points. Actual 51.1 points.
- 14:00 U.S. JOLTS Job Openings. Estimate 3.77M. Actual 3.88M.
- 14:30 U.S. Natural Gas Storage. Estimate 80B. Actual 87B.
*Key releases are highlighted in bold
*All release times are GMT
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