USD/CAD - Pushes Above 1.05 On Weak Unemployment Claims

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 |  Includes: FXC, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The Canadian dollar has lost ground on Thursday, as USD/CAD has crossed above the 1.05 level in North American trading. The pair climbed higher following a weaker than expected reading from Unemployment Claims. U.S. Trade Balance pointed to a wider deficit than expected. Over in Canada, the trade deficit narrowed to its lowest level in four months.

U.S. Unemployment Claims have been fairly steady over the past few weeks, but with speculation increasing about a possible December taper by the Federal Reserve, every employment release is under the markets microscope. The indicator showed little change with a reading of 339 thousand, but this was above the estimate of 331 thousand. There wasn't any relief from Thursday's other key release, Trade Balance. The October deficit widened to -$41.8 billion, compared to -$38.8 billion in September. This was well above the estimate of -$38.7 billion.

Incoming Federal Reserve head Janet Yellen will testify before the powerful Senate Banking Committee on Thursday. The hearing could be a rough one for Yellen, as Republicans are expected to grill her on the Fed’s QE program, which they oppose. Yellen is considered dovish in her monetary outlook and supported Bernard Bernanke in implementing QE, which currently stands at $85 billlion each month. On Wednesday, Yellen said that the economy is not performing up to its potential and unemployment remains too high.

Looking at Canadian data, Trade Balance improved to -$0.4 billion, the lowest deficit we've seen since June. This easily beat the estimate of $-1.2 billion. Meanwhile, inflation indicators continue to point to very weak inflation in the Canadian economy, with New Housing Price Index posting a flat reading of 0.0%, the first time the indicator has failed to record any inflation since April 2011.

Canada's economy continues to post mixed numbers, but there was some positive news on the fiscal front earlier in the week. The finance ministry said it would post a budget surplus of C$3.7 billion starting in April 2015, much higher than the March forecast, which called for a surplus of C$800 million. This would mean that the country would achieve a balanced budget sometime in 2015, assuming that there are no hiccups along the way. A stronger fiscal situation could give a much-needed boost to the struggling Canadian dollar.

USD/CAD for Thursday, November 14, 2013

Forex Rate Graph 21/1/13

USD/CAD November 14 at 15:20 GMT

USD/CAD 1.0514 H: 1.0526 L: 1.0441

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0337 1.0442 1.0502 1.0573 1.0652 1.0837
Click to enlarge
  • USD/CAD has posted sharp gains in Thursday trading. The pair crossed above the 1.05 line late in the European session and continues to rise in North American trading.
  • On the upside, the pair is facing resistance at 1.0573. This is followed by resistance at 1.0652, which has held firm since October 2011.
  • The line of 1.0502 has reverted to a support line. This is followed by a support level at 1.0442.
  • Current range: 1.0502to 1.0573

Further levels in both directions:

  • Below: 1.0502, 1.0442, 1.0337, 1.0282, 1.0224 and 1.0158
  • Above 1.0573, 1.0652 and 1.0837 and 1.0945

OANDA's Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions, continuing the trend we have seen for most of the week. This is not reflected in the current movement of the pair, as the US dollar has posted sharp gains on Thursday. A majority of the open positions in the USD/CAD ratio are short, indicating a trader bias towards the Canadian dollar reversing its current downward direction.

The Canadian dollar has weakened and finds itself above the 1.05 line on Thursday. We could see the Canadian currency post more losses in the North American session, as the loonie has been under strong pressure from the US dollar throughout the day.

USD/CAD Fundamentals

  • 12:00 Federal Chairman Bernard Bernanke Speaks.
  • 13:30 Canadian Trade Balance. Estimate -1.2B. Actual -0.4B.
  • 13:30 New Housing Price Index. Estimate 0.2%. Actual 0.2%.
  • 13:30 US Trade Balance. Estimate -38.7B. Actual -41.8B.
  • 13:30 US Unemployment Claims. Estimate 331K. Actual 339K.
  • 13:30 US Preliminary Non-Farm Productivity. Estimate 1.3%. Actual 1.9%.
  • 13:30 US Preliminary Unit Labor Costs. Estimate 1.1%. Actual -0.6%.
  • 15:00 Federal Reserve Chairperson-Designate Janet Yellen Testifies. Yellen will testify before the Senate Banking Committee.
  • 15:30 US Natural Gas Storage. Estimate 21B.
  • 16:00 US Crude Oil Inventories. Estimate 0.7M.
  • 18:01 US 30-year Bond Auction.

*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.