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By Kenny Fisher

The Canadian dollar continues to lose ground, as USD/CAD crossed above the 1.09 line in Tuesday trading. The currency has lost close to 300 points in January, and is trading at its lowest level against the US dollar since October 2009. In economic news, US Retail Sales dropped in December, while Core Retail Sales improved and beat the estimate. There are no Canadian releases on Tuesday.

The Bank of Canada released its quarterly Business Outlook Survey on Monday, and the report showed that Canadian businesses were more optimistic in Q4 about investment and hiring compared to Q3. At the same time, companies dealing with the domestic market were less confident than those that rely on the global economy, which has shown improvement. Meanwhile, Canadian employment numbers looked awful last week, as Employment Change tumbled to -45.9 thousand, erasing a strong gain of 21.6 thousand a month earlier. This was nowhere near the estimate of 14.4 thousand. The unemployment rate, which had hovered at 6.9% for three straight readings, jumped to 7.2%. The dismal figures came on the heels of weak numbers from Building Permits and the Ivey PMI. If Canada continues to produce weak numbers, the loonie could soon find itself on the other side of the key 1.10 line.

US retail sales numbers painted a mixed picture on Tuesday. Retail Sales dropped sharply to 0.2%, down from 0.7% in November. However, this figure matched the forecast. Core Retail Sales took the opposite route, jumping to 0.7%, compared to 0.4% the month before. This easily beat the estimate of 0.4%. The greenback has responded with gains against the struggling Canadian dollar.

US employment numbers started 2014 on a positive note, but Friday’s Non-Farm Payrolls was dismal, posting its lowest gain since May 2012. The key employment indicator dropped to just 74 thousand, down from 203 thousand a month earlier. This was nowhere near the estimate of 196 thousand. Although the unemployment rate dropped to 6.7%, this was due to a drop in the participation rate, which fell to 62.8%, its lowest level since 1978. This figure points to a worrying trend of a jobless US recovery.

Friday's disappointing Non-Farm Payrolls report may create some concern in the markets, but is unlikely to change the Federal Reserve's path of tapering QE, which it started just this month. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each meeting. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see a reduction in QE at the next meeting.

USD/CAD for Tuesday, January 14, 2014

Forex Rate Graph 21/1/13

USD/CAD January 14 at 15:20 GMT

USD/CAD 1.0922 H: 1.0932 L: 1.0879

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0652 1.0783 1.0852 1.1000 1.1094 1.1319

  • USD/CAD continues to move higher in Tuesday trading. The pair pushed above the 1.09 line late in the European session.
  • 1.0852 continues to provide support. This is followed by a support level at 1.0783.
  • 1.1000, a key level, is the next line of resistance. This line has been weakening as the Canadian dollar continues to lose ground. This is followed by 1.1094, which has remained intact since September 2009.
  • Current range: 1.0852 to 1.1000

Further levels in both directions:

  • Below: 1.0852, 1.0783, 1.0652, 1.0573 and 1.0502
  • Above 1.1000, 1.1094 and 1.1319 and 1.1496

OANDA's Open Positions Ratio

USD/CAD ratio remains almost unchanged in Monday trading, continuing the trend we have since last week. This is not reflected in the pair's movement, as the Canadian dollar continues to lose ground. USD/CAD is made up of a majority of short positions, indicating a trader bias towards the Canadian dollar reversing its downward spiral and moving to higher ground.

The Canadian dollar continues its downward spin, as USD/CAD trades above the 1.09 level. The pair has edged higher early in the North American session, as the US dollar continues to put pressure on the struggling Canadian currency.

USD/CAD Fundamentals

  • 12:30 US NFIB Small Business Index. Estimate 93.2 points.
  • 13:30 US Core Retail Sales. Estimate 0.4%. Actual 0.7%.
  • 13:30 US Retail Sales. Estimate 0.2%. Actual 0.2%.
  • 13:30 US Import Prices. Estimate 0.3%. Actual 0.0%.
  • 15:00 US Business Inventories. Estimate 0.4%. Actual 0.4%.
  • 17:45 US FOMC Member Charles Plosser Speaks.
  • 18:20 US FOMC Member Richard Fisher Speaks.

*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.

Source: USD/CAD - U.S. Dollar Pushes Above 1.09 After Mixed U.S. Retail Sales Data