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USD/CAD trims losses in early trade
The U.S. dollar trimmed losses against its Canadian counterpart on Thursday, as demand for the greenback remained broadly supported by investors despite the release of mixed U.S. economic reports.
USD/CAD eased off 1.1803, the pair's lowest since January 8, to hit 1.1925 during early U.S. trade, still down 0.20%.
The pair was likely to find support at 1.1728, the low of January 6 and resistance at 1.2018, Wednesday's high and a more than five-year high.
In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 9 increased by 19,000 to 316,000 from the previous week’s total of 297,000.
Analysts had expected initial jobless claims to decline by 6,000 to 291,000 last week.
Separately, the Federal Reserve Bank of New York reported that its general business conditions index increased to 10.0 this month from a reading of -3.6 in December. Analysts had expected the index to rise to 5.0 in January.
In addition, the Commerce Department said that U.S. producer prices fell 0.3% last month, compared to forecasts for a 0.4% decline, after falling 0.2% in November.
The core producer price index eased up 0.3% last month, above expectations for a gain of 0.1% and following a flat reading in November.
The loonie was sharply higher against the euro, with EUR/CAD tumbling 1.21% to 1.3919.
The single currency remained under pressure after an interim ruling by the European Court of Justice on Wednesday was seen as clearing the way for the ECB to implement quantitative easing measures at its upcoming meeting on January 22.
The advocate general of the European Court of Justice, Pedro Cruz Villalon, advised judges to approve the ECB's Outright Monetary Transactions program, a measure which was launched in 2012.
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USD/CAD almost unchanged, near more than 5-year highs
The U.S. dollar was almost unchanged against its Canadian counterpart on Monday, hovering close to more than five-year highs as trading volumes were expected to remain thin with U.S. markets closed for a national holiday.
USD/CAD hit 1.1986 during early U.S. trade, the session high; the pair subsequently consolidated at 1.1972.
The pair was likely to find support at 1.1799, the low of January 15 and resistance at 1.2046, the high of January 16 and a more than five-year peak.
The dollar remained broadly supported after the Swiss National Bank abandoned its three-year old 1.20 per euro exchange rate cap in a shock move last Thursday.
In addition, the University of Michigan said, in a preliminary report on Friday, that its consumer sentiment index rose to a 11-year high of 98.2 this month from 93.6 in December, compared to expectations for a rise to 94.1.
In Canada, official data on Monday showed that foreign securities purchases slowed to C$4.29 billion in November from C$9.53 billion the previous month. Analysts had expected foreign securities purchases to fall to C$7.23 billion in November.
The loonie was lower against the euro, with EUR/CAD gaining 0.29% to 1.3904.
Sentiment on the euro remained fragile amid mounting expectations that the European Central Bank will launch a government bond-buying program at its meeting on Thursday, in a bid to stave off the threat of deflation in the euro area.
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USD/CAD hits 6-year highs after surprise BoC rate cut
The Canadian dollar dropped to six-year lows against the U.S. dollar on Wednesday after the Bank of Canada cut rates by 25 basis points in an unexpected move, in response to the recent sharp drop in oil prices.
USD/CAD hit highs of 1.2275 immediately following the announcement, the most since April 2009 and was last at 1.2286, a gain of 1.39% on the day.
The BoC lowered its overnight target rate to 0.75% from 1.0% previously. The consensus expectation had been for no change.
The central bank said the recent rout in oil prices over the past six months would be negative for growth and underlying inflation in Canada. It expects lower oil prices to boost global economic growth, especially in the United States, while widening the divergences among economies.
The BoC said it now expects economic growth to slow to about 1.5% and the output gap to widen in the first half of 2015. Inflation is also expected to fall below the bank’s target during the coming year, before moving higher again in 2016. The bank said consumer inflation was already reflecting the fall in oil prices.
“The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response” the bank said in a statement.
The loonie was also sharply lower against the euro and the yen, with EUR/CAD advancing 2.27% to 1.4305 and CAD/JPY falling 2.52% to 95.62.
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Canada's Inflation Slows to 1.5% in Dec, Hurt by Gasoline Plunge
December’s Consumer Price Index (CPI) hit the lowest level since March, as gasoline prices fell the most in over five years, dragging down the overall transportation costs.
Canada's December inflation decelerated to 1.5% over the past year, after easing to 2% in November, Statistics Canada reported on Friday. The fresh figures came close to analysts' consensus, which projected inflation to decelerate to 1.6%.
The Bank of Canada's (BoC) core CPI, which excludes eight volatile components, edged up to 2.2%, slightly below the expected 2.3%.
The newly released data put additional pressure on the Canadian dollar, which has suffered heavy losses over the previous two days, following the Bank of Canada's (BoC) decision to cut rates on Wednesday.
- Gasoline prices
Slower inflation pace was largely due to a 16.6% fall in gasoline prices, which marked the sharpest drop since September 2009 on an annual basis. This brought the transportation costs down 2.8% in December over the past year – the biggest fall in over five years.
Every single Canadian province recorded lower prices at the gas stations in December, the federal agency noted.
Aside from cheaper transportation costs, Canadians faced steeper prices for shelter and food. The shelter index rose 2.4% on an annual basis, led by higher gas and electricity prices. At the same time, food jumped 3.7% over the past year, with fresh vegetables and meat leading the gains.
- BoC's surprise On Wednesday, the BoC cut its benchmark interest rate to 0.75% from 1% - the level it has been since September 2010 - citing the economic effects of lower oil prices on the Canadian economy.
"The move by the BoC came as a big shock. It was interpreted as a proactive way to create a buffer against the big headwind in the energy sector," Exarhos explained.
On top of that, the central bank has dramatically slashed its inflation projections, stating that total CPI inflation will now remain below its target of 2% for the whole of 2015 and will only rise back up in 2016. Headline annual inflation is estimated to be at 0.5% in the first quarter of 2015.
"The oil price shock increases both downside risks to the inflation profile and financial stability risks," the bank said in its Monetary Policy Report (MPR).
The bank has revealed that its calculations are based on the assumption that the average oil price will be $60 a barrel, which led analysts to question what the central bank plans to do if oil prices remain lower for a prolonged period of time.
BoC Governor Stephen Poloz warned that if oil remains below $60 per barrel, the bank will adjust its response. "The world changes fast and if it changes again we can take out more insurance or reduce the amount of insurance we’ve taken out," Poloz said at a press conference after the MPR release.
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USD/CAD forecast for the week of January 26, 2015
The USD/CAD pair broke much higher during the course of the week, using the 1.20 level as a springboard to reach close to the 1.25 handle. This of course was exaggerated by the Bank of Canada cutting interest rates in a surprise move this week. Ultimately, we believe that the Canadian dollar is on its back foot now, and should continue to be sold. However, we recognize that we are approaching a significant round number, so we could get a little bit of a pullback. Think of pullbacks as potential value in the US dollar and therefore buying opportunities.
USD/CAD: Loonie Dismantled by Weakening Crude Prices
The commodity-based Canadian dollar depreciated versus its US namesake on Monday, joining the downward direction of crude oil, which has once again visited the $45 level.
The loonie edged down 0.32% to C$1.2445 against the greenback, nearing the intraday low of C$1.2475, its weakest level since April 2009.
"Oil is probably the most important [mover this week], but in terms of independent markers it would be the FOMC in the US and the Canadian GDP data," chief currency strategist at Scotiabank, Camilla Sutton, told WBP Online.
Crude futures were down over 1% on Monday, with WTI declining 0.83% to $45.21 a barrel and Brent falling 1.24% to $48.18 a barrel.
Looking ahead, the US Federal Reserve (Fed) is holding its policy meeting on Wednesday, and some economists are expecting to see some caution.
"Recent economic data are asking for more patience from the Fed. The US economy cannot escape from disinflation and there are several ways in which disinflation could be longer lasting. What’s more, wages are decelerating. This has strengthened our case for a delay in the first Fed rate hike from mid-2015 to 2015 Q4," Rabobank senior US strategist Philip Marey said in a research note.
Also, the Bank of Canada’s (BoC) unexpected decision to cut its benchmark interest rate to 0.75% last week has been weighing on the Fed.
In contrast, BNP Paribas analysts said they expect "the Fed to stick with its December message, continuing to look through soft spots in the data and falling headline inflation and noting further labor market improvement. This should be good news for the dollar."
Other elements to watch for include economic growth figures for the US and Canada, which are both scheduled to be released on Friday. Economists project 3% annualized growth in the fourth quarter in the US, down from 5%. Meanwhile, Canada's economy is expected to see a contraction of 0.2% in November, reflecting weak wholesale and manufacturing reports.
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Canadian GDP falls 0.2% – USD/CAD shoots above 1.27
Another big disappointment from Canada: the economy squeezed by 0.2% in November, much worse than expected. Canada is unique in releasing GDP numbers on a monthly instead of a quarterly basis. Year over year, output grew 1.9%, below 2.1% predicted.
USD/CAD is shooting above 1.27. Update: the pair already reaches 1.2770.
This is not the first disappointment from Canada. We had a significant downwards revision of 2014 employment data. Statistics Canada basically erased a third of job gains reported throughout 2014 and the unemployment rate is up to 6.7%. This does not bode well for next week’s labor data from Canada.
Here are 4 reasons for the CAD Crash
Canada was expected to report a slide of 0.1% in November’s Gross Domestic Output after a rise of 0.3% in October (before revisions).
USD/CAD traded around 1.2670 towards the publication. The US releases its own GDP numbers at the same time.
Is the road to 1.30 open? Well, the vultures are circling on the loonie: CAD Sell-Off Intact – Credit Agricole
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USD/CAD rises after U.S. data in risk-off trade
The U.S. dollar was higher against its Canadian counterpart on Wednesday, even after data showed that U.S. nonfarm private employment rose less-than-expected in January as market sentiment remained under pressure amid concerns over Greece.
USD/CAD hit 1.2491 during early U.S. trade, the session high; the pair subsequently consolidated at 1.2488, advancing 0.60%.
The pair was likely to find support at 1.2352, Tuesday's low and resistance at 1.2644, Tuesday's high.
In a report, payroll processing firm ADP said non-farm private employment rose by 213,000 last month, below expectations for an increase of 225,000.
The economy created 253,000 jobs in December, whose figure was upwardly revised from a previously reported 241,000.
Meanwhile, investors remained cautious amid fresh concerns over Greece, following reports that the European Central Bank is unwilling to back government plans to renegotiate the terms of the country’s €140 billion bailout.
The commodity-linked Canadian dollar was also hit as crude oil prices dropped nearly 4% as investors locked in gains from a rally which took prices 19% higher over the past four sessions.
The loonie was also lower against the euro, with EUR/CAD edging up 0.16% to 1.4277.
Also Wednesday, data showed that the euro zone private sector expanded at the fastest pace in six months in January.
The euro zone composite purchasing managers’ index, which measures activity in the region’s manufacturing and services sectors rose to 52.6 up from a preliminary estimate of 52.2 and a final reading of 51.4 in December.
Output growth expanded in Germany, Italy and Spain, but the downturn in the French economy extended into its ninth month.
A separate report showed that euro zone retail sales rose 2.8% in December from a year earlier, the strongest increase in nearly eight years.
Later in the day, the Institute of Supply Management was to release data on non-manufacturing activity, while Canada was to publish its Ivey PMI.
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USD/CAD Forecast Feb. 9-13
The Canadian dollar posted its first winning week since early December, as USD/CAD gained about 160 points last week. This week’s highlight is Manufacturing Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
Updates:
USD/CAD showed strong movement last week, and the Canadian dollar finally managed to post a winning week. Canadian Ivey PMI slipped, but Building Permits and employment number were strong. In the US, PMIs were lukewarm, but there was good news from a superb NFP report , upwards revisions and big bounce in wages.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
* All times are GMT
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USD/CAD slides lower in early trade
The U.S. dollar was lower against its Canadian counterpart on Monday, as the greenback pulled away from highs hit on Friday after strong U.S. jobs data and as trading was expected to remain quiet with no major U.S. data to be released throughout the session.
USD/CAD hit 1.2482 during early U.S. trade, the session low; the pair subsequently consolidated at 1.2459, declining 0.54%.
The pair was likely to find support at 1.2389, the low of February 5 and resistance at 1.2587, the high of February 5.
The Labor Department reported on Friday that the U.S. economy added 257,000 jobs in January, far more than the 234,000 forecast by economists. December’s figure was revised to 329,000 from a previously reported 252,000.
The unemployment rate ticked up to 5.7% last month from December’s 5.6% hourly earnings and the participation rate both saw increases in January.
The upbeat jobs report was seen as strong enough to indicate that the Federal Reserve will remain on track to start raising rates from near zero levels as early as June.
In Canada, data on Monday showed that housing starts rose by 187,000 in January, beating expectations for a 185,000 increase, after a downwardly revised 180,000 gain in December.
The report came after data on Friday showed that Canadian building permits increased by 7.7% in December, more than the expected 5.0% rise.
The Canadian dollar had also received support after Statistics Canada reported on Friday that 35,400 jobs were created last month, compared to expectations for a 5,000 gain.
Canada's unemployment rate fell to 6.6% in January from 6.7% the previous month.
The loonie was higher against the euro, with EUR/CAD retreating 0.57% to 1.4096.
The single currency weakened after Greek Prime Minister Alexis Tsipras said Sunday that he would stick to plans to roll back austerity measures and reject an international bailout extension.
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