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By Kenny Fisher

The Canadian dollar is showing gains on Wednesday, as USD/CAD trades in the mid-1.10 range. In economic news, it was another rough day for US releases, as ADP Non-Farm Payrolls and ISM Non-Farm Manufacturing PMI both lost ground in February and fell short of expectations. In Canada, the BOC held the benchmark interest rate at 1.00%, as was expected. The rate has been pegged at this level since September 2010.

In the US, it's looking like another nasty streak of weak releases. ADP Non-Farm Employment Change posted another sharp drop in February, coming in at 139 thousand, down from 175 thousand a month earlier. The weak reading was well off the estimate of 159 thousand. We'll get a look at Unemployment Claims and the official Non-Farm Payrolls later in the week, and the dollar could take a hit if these releases fail to meet expectations. Meanwhile, the news was not much better from the services sector. ISM Non-Manufacturing PMI dropped to 51.6 points, down sharply from 54.0 a month ago. This was well below the estimate of 53.8, and the index's lowest level since August 2010.

Meanwhile, nervous markets are glued to the Ukraine, as Russia has effectively taken over Crimea following the ousting of the Ukrainian president, who has fled to Russia. The US and Russia continue to talk tough as the standoff between Russia and Ukraine continue. Until this tense situation subsides, traders should be prepared for volatility in the currency markets.

Despite the string of disappointing numbers out of the US, the assumption is that the Fed will continue its QE tapering moves later in March. This was the signal from Fed Chair Janet Yellen when she testified before the Senate last week. Another trim to QE is bullish for the US dollar and would mark a vote of confidence by the Fed in the US economy. However, if US numbers continue to point downwards, we could see the US dollar take a hit against its major rivals.

USD/CAD for Wednesday, March 5, 2014

Forex Rate Graph 21/1/13

USD/CAD March 5 at 15:20 GMT

USD/CAD 1.1046 H: 1.1099 L: 1.1035

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0852 1.0906 1.1000 1.1094 1.1177 1.1319

  • USD/CAD has posted modest losses in Wednesday trading.
  • 1.1094 is the next resistance line. It is followed by 1.1174, which is protecting the 1.12 level.
  • The key line of 1.10 is providing support to the pair. It could face strong pressure if the Canadian dollar continues to improve. Next, there is support at 1.0906, protecting the 1.09 level.
  • Current range: 1.1000 to 1.1094

Further levels in both directions:

  • Below: 1.1000, 1.0906, 1.0852 and 1.0783
  • Above: 1.1094, 1.1177, 1.1319, 1.1496 and 1.1639

OANDA's Open Positions Ratio

USD/CAD ratio is almost unchanged in Wednesday trade, continuing the trend we have seen all week. This is not consistent with what we are seeing from the pair, as the Canadian dollar has posted gains. The ratio has a majority of short positions, indicating trader bias towards the loonie moving to higher levels.

The Canadian dollar is showing some improvement after dismal US releases on Wednesday. The US dollar is steady in the North American session.

USD/CAD Fundamentals

  • 15:00 Bank of Canada Overnight Rate. Estimate 1.00%. Actual 1.00%.
  • 15:00 Bank of Canada Rate Statement.
  • 13:15 US ADP Non-Farm Employment Change. Estimate 159K. Actual 139K.
  • 14:00 US Final Services PMI. Estimate 52.7 points. Actual 53.3 points.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 53.8 points. Actual 51.6 points.
  • 15:30 US Crude Oil Inventories. Estimate 0.9M.
  • 19:00 US Beige Book.

*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 Rises As U.S. Numbers Slide