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By Kenny Fisher

The Canadian dollar continues to improve against its US counterpart on Monday. Early in the North American session, USD/CAD is trading in the mid-1.07 range. The loonie has gained over 100 points in the past week, buoyed by strong Canadian inflation and retail sales numbers. Taking a look at Monday's releases, Flash Manufacturing PMI improved in May. The markets are expecting more good news from Existing Homes, with the markets expecting the indicator's upward trend to continue.

Canadian releases enjoyed a strong week, highlighted by positive inflation and retail sales numbers on Friday. Core CPI and CPI both posted gains of 0.5%, beating estimates of 0.2%. Core Retail Sales improved to 0.7%, surpassing the forecast of 0.4%. Finally, Retail Sales jumped 1.1% last month, crushing the estimate of 0.4%. The Canadian dollar took advantage of the solid releases, as the currency trades at its highest levels since January.

There was positive economic news out of the US on Thursday, as Unemployment Claims dipped to 312,000 last week, beating the estimate of 316,000. 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 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 US interest rates will remain at ultra-low levels has weighed on the US dollar and has helped the Canadian dollar hold its own this week.

USD/CAD for Monday, June 23, 2014

USD/CAD June 23 at 14:00 GMT

USD/CAD 1.0739 H: 1.0754 L: 1.0717

USD/CAD Technical

S3S2S1R1R2R3
1.05721.06781.07061.07751.08521.0906
  • The pair moved lower in the Asian session, but recovered most of those losses in the European session. The pair is unchanged early in the North American session.
  • 1.0775 has reverted to a resistance role as the Canadian dollar trades at lower levels.
  • 1.0706 is an immediate support level. This is followed by 1.0678, which was last tested in early January.
  • Current range: 1.0706 to 1.0775

Further levels in both directions:

  • Below: 1.0706, 1.0678, 1.0572 and 1.0414
  • Above: 1.0775, 1.0852, 1.0906 and 1.10

OANDA's Open Positions Ratio

USD/CAD ratio is pointing to gains in long positions in Monday trade. This is not consistent with the pair's movement as the Canadian dollar has posted modest gains to start off the trading week. USD/CAD has a majority of long positions, indicative of trader bias toward the US dollar reversing directions and moving higher.

USD/CAD Fundamentals

  • 13:45 US Flash Manufacturing PMI. Estimate 56.1 points. Actual 57.5 points.
  • 14:00 US Existing Home Sales. Estimate 4.74M.

*Key releases are highlighted in bold

*All release times are GMT

Source: U.S. Dollar / Canadian Dollar: Canadian Dollar Rally Continues