USD/CAD - U.S. Dollar Climbs Despite Weak Manufacturing PMI

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 |  Includes: FXC, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

USD/CAD has posted gains on Monday, as the pair trades at the 1.09 line early in the North American session. The greenback is broadly higher as we start the week, and shrugged off a disappointing ISM Manufacturing PMI. There are no Canadian releases on Monday.

US numbers didn’t look sharp to start the week, as ISM Manufacturing PMI, a key release, dropped to 53.2 points, well off the estimate of 55.7. The index had been moving higher throughout 2014, but this trend came to a crashing halt in the May reading. We’ll get another look at important factory data on Monday, with the release of Factory Orders. The indicator has been losing ground, and the markets are bracing for another drop in the May release.

US numbers were mostly a disappointment last week. Preliminary GDP, the primary gauge of economic activity, posted its first decline since Q2 of 2009. The indicator came in at -1.0% for Q1, worse than the estimate of -0.6%. Harsh winter conditions took their toll on the economy in Q1, and analysts expect a rebound in Q2. After a strong gain in March, Pending Home Sales softened, coming in at 0.4%. This was nowhere near the gain of 1.1%. On a brighter note, Employment Claims dropped to 300 thousand, easily beating the estimate of 321 thousand.

There were on surprises from Canadian GDP, which was released last week. The indicator is published monthly, unlike most major economies, which release GDP on a quarterly basis. The May release dipped to 0.1%, a three-month low. This matched the estimate, and the pair did not react to this release. However, weak economic growth will likely weigh on the Canadian dollar, and the currency could lose ground if key releases fail to meet expectations.

USD/CAD for Monday, June 2, 2014

USD/CAD June 2 at 14:55 GMT

USD/CAD 1.0898 H: 1.0904 L: 1.0843

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0706 1.0775 1.0852 1.0906 1.10 1.1094
Click to enlarge
  • 1.0906 is the next resistance line. There is stronger resistance at the key line of 1.10, which has remained intact since late April.
  • 1.0852 continues to be busy, and has switched back to a support role as the pair trades at higher levels. 1.0775 is stronger.
  • Current range: 1.0852 to 1.0906

Further levels in both directions:

  • Below: 1.0852, 1.0775, 1.0706, 1.0678 and 1.06
  • Above: 1.0906, 1.10, 1.1094 and 1.1177

OANDA’s Open Positions Ratio

USD/CAD ratio is pointing to gains in long positions in Monday trading. This is consistent with what the current movement of the pair, as the US dollar has strengthened. The ratio has a majority of long positions, indicative of trader bias in favor of the US dollar continuing to post gains.

USD/CAD is flirting with the 1.09 on Monday. The Canadian dollar is under pressure in the North American session.

USD/CAD Fundamentals

  • 12:40 US Treasury Secretary Jack Lew Speaks.
  • 13:45 US Final Manufacturing PMI. Estimate 56.2 points. Actual 56.4 points.
  • 14:00 US ISM Manufacturing PMI. Estimate 55.7 points. Actual 53.2 points.
  • 14:00 US Construction Spending. Estimate 0.8%. Actual 0.2%.
  • 14:00 US ISM Manufacturing Prices. Estimate 56.8 points. Actual 60.0 points.

*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.