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By Kenny Fisher

The Canadian dollar continues to struggle as USD/CAD has climbed above the 1.11 line, its highest level in over four years. Taking a look at Thursday's releases, US Unemployment Claims posted another strong reading of 326 thousand, beating the estimate. US Existing Home Sales did not fare as well, as the key indicator continues to lose ground. In Canada, Core Retail Sales and Retail Sales both beat their estimates.

As expected, the Bank of Canada kept the benchmark interest rate pegged at 1.0%. However, the Canadian dollar took a hit as the markets reacted negatively to the BOC's policy statement, in which the Bank noted that it was increasingly concerned about persistently low inflation. The loonie lost over one cent on Wednesday, and remains under strong pressure from the surging US dollar, despite solid Canadian retail sales numbers on Thursday. The Canadian dollar has lost almost 500 points since the beginning of January.

In the US, Unemployment Claims was unchanged at 326 thousand, another strong reading. This beat the estimate of 331 thousand. US Exiting Home Sales dropped to 4.87 million, shy of the estimate of the 4.94 million. This was the indicator's fourth consecutive drop, adding to concern about the health of the US housing industry.

Weak inflation concerns are not restricted to Canada or Europe, as the US has also been plagued by persistently low inflation, an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last week, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten. Analysts will be watching closely whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1, replacing Bernard Bernanke.

USD/CAD for Thursday, January 23, 2014

Forex Rate Graph 21/1/13

USD/CAD January 23 at 15:50 GMT

USD/CAD 1.1132 H: 1.1174 L: 1.1093

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0906 1.1000 1.1094 1.1177 1.1319 1.1496

  • USD/CAD continues to move upwards in Thursday's trading. The pair hit a high of 1.1174 early in the European session.
  • 1.1094 has reverted to a support role as the Canadian dollar continues to lose ground. This is followed by a support level at the round number of 1.10.
  • On the upside, 1.1177 is under strong pressure and could break during the day. This is followed by resistance at 1.1319, which has remained intact since July 2009.
  • Current range: 1.1177 to 1.1319

Further levels in both directions:

  • Below: 1.1000, 1.0906, 1.0852, 1.0783 and 1.0652
  • Above: 1.1094, 1.1177, 1.1319 and 1.1496 and 1.1610

OANDA's Open Positions Ratio

USD/CAD ratio is pointing to gains in short positions in Thursday trading. This is a result of strong gains by the US dollar, which have led to numerous long positions being covered, resulting in a higher percentage of open short positions. The ratio is made up of a majority of short positions, indicating a trader bias towards the Canadian dollar reversing its downward movement.

The US dollar continues to manhandle its Canadian counterpart, and has climbed above the 1.11 level. The pair is steady early in the North American session.

USD/CAD Fundamentals

  • 13:30 Canadian Core Retail Sales. Estimate 0.3%. Actual 0.4%.
  • 13:30 Canadian Retail Sales. Estimate 0.3%. Actual 0.4%.
  • 13:30 US Unemployment Claims. Estimate 331K. Actual 326K.
  • 14:00 US Flash Manufacturing PMI. Estimate 55.2. Actual 53.7 points.
  • 14:00 US HPI. Exp. 0.4%. Actual 0.1%.
  • 15:00 US Existing Home Sales. Estimate 4.94M. Actual 4.87M.
  • 15:00 US CB Leading Index. Estimate 0.2%. Actual 0.1%.
  • 15:30 US Natural Gas Storage. Estimate -112B. Actual -107B.
  • 16:00 US Crude Oil Inventories. Estimate 0.7M. Actual 1.0M.

*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 - Loonie Takes Tumble After BOC Statement