U.S. Dollar / Canadian Dollar: Steady As Unemployment Claims Jump

by: Dean Popplewell

The Canadian dollar continues to trade quietly in Thursday trading. Early in the North American session, USD/CAD was trading in the mid-1.11 range. In economic news, the US Federal Reserve announced another $10 billion reduction in its QE program. Thursday will be a busy day in the US, with three major releases on the schedule - Advance GDP, Unemployment Claims and Pending Home Sales. There are no Canadian releases on Thursday.

Most analysts had predicted that the Federal Reserve would go ahead and reduce QE for a second straight month, and that's exactly what transpired on Wednesday. In a policy statement, the Federal Reserve reduced its stimulus program by another $10 billion, lowering QE to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday's policy meeting was Ben Bernanke's last hurrah, as Janet Yellen takes over the reins as the Fed chair on February 1.

On Thursday, Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348,000, up sharply from 326,000 a week earlier. This was higher than the estimate of 331,000. Meanwhile, Advanced GDP posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the Q3 reading of 2.8%.

The Canadian dollar continues to trade at three-year lows against the US currency. The loonie slipped over 100 points last week, and continues to struggle. The loonie has had a miserable January, surrendering about 600 points to the surging US dollar. As expected, the Bank of Canada kept the benchmark interest rate pegged at 1.0% late last week. 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, which has been weighing heavily on the sluggish Canadian economy. We'll get a look at the health of the Canadian economy on Friday, with the release of GDP.

USD/CAD for Thursday, January 30, 2014

USD/CAD January 30 at 14:40 GMT

USD/CAD 1.1160 H: 1.1199 L: 1.1157

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0906 1.1000 1.1094 1.1177 1.1319 1.1496
  • USD/CAD has lost ground in Thursday trading. The pair touched a high of 1.1199 late in the Asian session but has since retracted.
  • 1.1094 is providing support. This is followed by support at the key level of 1.1000.
  • On the upside, 1.1177 is providing resistance. This is a weak line, which could face pressure if the Canadian dollar weakens. This is followed by resistance at 1.1319, which has remained intact since July 2009.
  • Current range: 1.1094 to 1.1177

Further levels in both directions:

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

OANDA's Open Positions Ratio

USD/CAD ratio is unchanged in Thursday trading. This is not consistent with what we are seeing from the pair, as the Canadian dollar has edged higher. The ratio is made up of a majority of short positions, indicating a trader bias toward the Canadian dollar moving to higher ground.

The Canadian dollar is steady in Thursday trading. With the US releasing key housing data later today, we could see some activity from the pair. Early in the North American session, the Canadian dollar has posted modest gains.

USD/CAD Fundamentals

  • 13:30 US Advance GDP. Estimate 3.3%. Actual 3.2%.
  • 13:30 US Unemployment Claims. Estimate 331K. Actual 358K.
  • 13:30 US Advance GDP Price Index. Estimate 1.2%. Actual 1.3%.
  • 15:00 US Pending Home Sales. Estimate -0.1%.
  • 15:30 US Natural Gas Storage. Estimate -225B.

*Key releases are highlighted in bold