USD/CAD - Flat Ahead Of Canadian Inflation, Retail Sales

Includes: FXC, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

It's been a very quiet week for USD/CAD, which continues to trade in the low-1.08 range in the Friday European session. On the release front, the markets are keeping a close eye on Canadian Core CPI and Core Retail Sales, and we can expect some movement from the pair if we are treated to some unexpected readings from these key events. U.S. markets are open on Friday, but there are no U.S. releases on the calendar.

There was positive economic news out of the U.S. on Thursday, as Unemployment Claims dipped to 312 thousand last week, beating the estimate of 316 thousand. As well, the Philly Fed Manufacturing Index, which has been on the upswing for most of 2014, continued the trend and improved to 17.8 points, crushing the estimate of 14.3. This was the index's strongest reading since last August, and points to a manufacturing sector which is expanding in order to keep up with increasing demand.

On Wednesday, the Federal Reserve continued to taper to its QE program, reducing the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won't see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1%-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as "steady as she goes." The perception that U.S. interest rates will remain at ultra-low levels has weighed on the U.S. dollar, and has helped the Canadian dollar hold its own this week.

In Canada, there was positive news as Wholesale Sales, an important indicator of consumer spending, jumped 1.2% in May, crushing the estimate of 0.3%. Earlier in the week, Foreign Securities Purchases posted a gain of $10.13 billion, its highest level since last May. The estimate stood at $4.27 billion. The markets are hoping the strong numbers continue on Friday, with the release of Core CPI and Core Retail Sales, the primary gauges of consumer inflation and consumer spending, respectively.

USD/CAD for Friday, June 20, 2014

USD/CAD June 20 at 10:10 GMT

USD/CAD 1.0822 H: 1.0826 L: 1.0814

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0678 1.0706 1.0775 1.0852 1.0906 1.1000
Click to enlarge
  • 1.0852 is the next resistance line resistance. It is a weak line which could face pressure if the US dollar improves. The next resistance line is at 1.0906.
  • 1.0775 continues to provide support. This line is not strong, but has held firm since early January.
  • Current range: 1.0775 to 1.0852

Further levels in both directions:

  • Below: 1.0775, 1.0706, 1.0678 and 1.0572
  • Above: 1.0852, 1.0906, 1.10 and 1.1094

OANDA's Open Positions Ratio

USD/CAD ratio is unchanged on Friday. This is consistent with the pair's lack of movement. USD/CAD has a majority of long positions, indicative of trader bias towards the US dollar breaking out and posting gains.

The Canadian dollar is listless on Friday. The pair is almost unchanged in the European session.

USD/CAD Fundamentals

  • 12:30 Canadian Core CPI. Estimate 0.2%.
  • 12:30 Canadian Core Retail Sales. Estimate 0.4%.
  • 12:30 Canadian Core CPI. Estimate 0.2%.
  • 12:30 Canadian Core Retail Sales. Estimate 0.4%.

*Key releases are highlighted in bold.

*All release times are GMT.