USD/CAD - Canadian Dollar Shrugs Off Weak Building Permits

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Includes: FXC, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

USD/CAD is showing little movement on Wednesday, trading at the 1.09 line in the North American session. In economic news, Canadian releases continue to struggle, as Building Permits posted a second straight decline. In the US, Federal Reserve chair Janet Yellen testifies before Congress.

The Canadian dollar has shown improvement against its US counterpart, despite disappointing Canadian data this week. Building Permits continues to struggle, as the key indicator posted a 3.5% decline, well off the estimate of a gain of 3.9%. On Tuesday, Trade Balance slid to $0.1 billion, well short of the estimate of $0.4 billion. There was no relief from Ivey PMI, which dropped to 54.1 points, a four-month low. The estimate stood at 54.5 points.

The Federal Reserve will be in the spotlight on Wednesday as Janet Yellen testifies before the Joint Economic Committee of Congress. Although recent employment data has been positive, Yellen has sounded cautious about the health of the economy, and if she reiterates these sentiments before Congress, we could see the dollar lose some ground. Meanwhile, the Federal Reserve trimmed its QE program by $10 billion last week. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn't get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a "considerable time" after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending, of course, on the strength of the US economy and the job market.

USD/CAD for Wednesday, May 7, 2014

Forex Rate Graph 21/1/13

USD/CAD May 7 at 14:15 GMT

USD/CAD 1.0883 H: 1.0908 L: 1.0875

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0706 1.0775 1.0852 1.0906 1.10 1.1094
Click to enlarge
  • USD/CAD is showing little activity in Wednesday. The pair briefly broke above the 1.09 line earlier in the North American session.
  • 1.0852 is providing support. This is followed by a stronger support line at 1.0775.
  • 1.0906 is the next resistance line. This is a weak line was tested earlier in the day. There is stronger resistance at the key level of 1.10.
  • Current range: 1.0852 to 1.0906

Further levels in both directions:

  • Below: 1.0852, 1.0775, 1.0706, 1.0678
  • Above: 1.0906, 1.10, 1.1094, 1.1177 and 1.1319

OANDA's Open Positions Ratio

USD/CAD ratio is pointing to gains in long positions in Wednesday trading, continuing the trend seen a day earlier. This is not reflected in the movement of the pair, as the Canadian dollar is almost unchanged. The ratio has a majority of long positions, indicative of a trader bias in favor of the US dollar moving to higher ground.

The pair is rangebound as it trades at the 1.09 line. In the North American session, we could see some activity following Janet Yellen's testimony before Congress.

USD/CAD Fundamentals

  • 12:30 Canadian Building Permits. Estimate +3.9%. Actual -3.0%.
  • 12:30 US Preliminary Nonfarm Productivity. Estimate -0.9%. Actual -1.7%
  • 12:30 US Preliminary Unit Labor Costs. Estimate 2.3%. Actual 4.2%.
  • 14:00 Federal Reserve Chair Janet Yellen Testifies Before Joint Economic Committee of Congress.
  • 14:30 US Crude Oil Inventories. Estimate 0.9M.
  • 17:01 US 10-year Bond Auction.
  • 19:00 US Consumer Credit. Estimate 15.4B.

*Key releases are highlighted in bold

*All release times are GMT

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