USD/CAD - Steady As U.S., Canada Post Strong Numbers

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

By Kenny Fisher

The Canadian dollar has steadied on Thursday, as USD/CAD trades in the low-1.09 range in the North American session. In economic news, there was positive news on both sides of the border. US Unemployment Claims dropped, while Canadian Building Permits came in well above expectations. As well, Canadian Ivey PMI surged in July, climbing to 54.1 points.

US Unemployment Claims dipped back below the 300 thousand level last week. The key indicator dropped to 289 thousand, beating the estimate of 305 thousand. The four-week claims average, which is less volatile than the weekly count, dipped to 293,500, its lowest level since February 2006. The stronger numbers point to increased hiring in response to stronger demand, which in turn has contributed to gains in income and stronger consumer spending. An improving job market is critical for economic growth, and the dollar has gained broad strength as key US data points upwards.

Canadian numbers continued to impress, as Building Permits posted a strong gain of 13.5% last month. This figure was close to the previous release of 13.8%, and crushed the forecast of -1.8%. Building Permits is an important gauge of the strength of the construction sector, and the markets will be hoping that Housing Starts, which will be released on Monday, follows suit with a strong showing. There was excellent news from Canadian Ivey PMI, which climbed to 54.1 points, matching the forecast. This was up sharply from 46.9 points a month earlier. The PMI pushed above the 50 line, which marks expansion, for the first time since April.

Canadian and US trade data strengthened in July. Canadian Trade Balance surprised the markets, with a strong trade surplus of $1.9 billion in July. The markets is used to seeing more deficits than surpluses, and the July estimate stood at $-0.1 billion. The July reading was the best we've seen since April 2012. Meanwhile, the US trade deficit unexpectedly narrowed in July, dropping to -$41.5 billion. This was the lowest deficit since April, and easily beat the estimate of $-44.2 billion. Trade Balance is closely linked to currency demand, since foreigners must purchase the local currency in order to buy domestic goods and services.

US PMIs continue to point upwards, indicative of an improving US economy. On Tuesday, ISM Non-manufacturing PMI looked sharp, rising to 58.7 points last month. This easily beat the estimate of 56.6, and was the index’s best showing since February 2011. This follows an excellent Manufacturing PMI reading last week, with the index climbing to 57.1 points, a three-year high. There was more positive news out of the US on Tuesday, as Factory Orders had an impressive July, gaining 1.1%. These solid numbers point to healthy expansion in the US manufacturing and services sectors, which has resulted in gains for the US dollar against most of its major rivals.

USD/CAD for Thursday, August 7, 2014

USD/CAD August 7 at 15:25 GMT

USD/CAD 1.0920 H: 1.0938 L: 1.0904

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0678 1.0775 1.0852 1.0961 1.1004 1.1124
Click to enlarge
  • USD/CAD posted slight gains in the Asian session but then retracted. The pair has been steady in the European and North American sessions.
  • 1.0961 remains an immediate resistance line. 1.1004 is stronger.
  • 1.0852 is providing support. 1.0775 follows.
  • Current range: 1.0852 to 1.0961

Further levels in both directions:

  • Below: 1.0852, 1.0775, 1.0678 and 1.0572
  • Above: 1.0961, 1.1004, 1.1124 and 1.1278

OANDA's Open Positions Ratio

USD/CAD ratio is almost unchanged in Thursday trade. This is consistent with the lack of movement being displayed by the pair. The ratio has a majority of short positions, indicative of trader bias towards the Canadian dollar breaking out and moving to higher ground.

USD/CAD Fundamentals

  • 12:30 US Unemployment Claims. Estimate 305K. Actual 289K.
  • 12:30 Canadian Building Permits. Estimate -1.8%. Actual +13.5%.
  • 14:00 Canadian Ivey PMI. Estimate 54.1 points. Actual 54.1 points.
  • 14:30 US Natural Gas Storage. Estimate 89B. Actual 82B.
  • 19:00 US Consumer Credit. Estimate 18.3B.

*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.