The Canadian dollar took advantage of solid US numbers on Thursday, as the pair trades in the mid-1.09 range in the North American session. On the release front, US data was solid. Unemployment Claims dropped below the 300 thousand level, beating the estimate. The Philly Fed Manufacturing Index posted a sharp gain in July, while Existing Housing Sales posted its best reading in close to a year. There are no Canadian releases on Thursday. In picturesque Jackson Hole, the Federal Reserve is hosting its annual financial symposium.
US numbers impressed the markets on Thursday. Unemployment Claims improved to 298 thousand, lower than the estimate of 302 thousand. The key indicator has now beaten the estimate in six of the past seven readings. Thursday's other key event, the Philly Fed Manufacturing Index, shot higher in July, rising to 28.0 points. The markets had expected the indicator to slip to 19.7 points. There was more good news on the housing front, as Existing Home Sales improved to 5.15 million, well above the estimate of 5.01 million. This marked the highest level we've since September 2013. It's particularly encouraging that the strong numbers were seen in a wide range of sectors, which points to balanced economic growth.
All eyes are on the Federal Reserve, which will release the minutes of its last policy meeting later on Wednesday. Traders are looking for clues as to when the Fed will press the trigger and raise interest rates, but may end up disappointed. Growth numbers have been positive, but job data could be better and inflation remains very low, so the Fed seems in no rush to tinker with interest rates. The Fed's asset purchase program (QE) is scheduled to wind up in October, and then the guessing game regarding a rate hike will heat up.
In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game regarding the timing of a rate hike will only intensify.
Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Thursday. This will be Janet Yellen's first appearance as Fed chair at the conference. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference's usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. Traders should treat Yellen's speech on Friday as a market-moving event.
USD/CAD August 21 at 14:55 GMT
- USD/CAD 1.0947 H: 1.0986 L: 1.0945
USD/CAD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.0678 | 1.0775 | 1.0852 | 1.0961 | 1.1004 | 1.1124 |
- USD/CAD touched a high of 1.0986 but then retracted. The pair has lost ground in the European session and remains under pressure in North American trade.
- 1.0961 is under strong pressure and was briefly breached late in the Asian session. 1.1004 is next.
- 1.0852 is providing strong support.
- Current range: 1.0852 to 1.0961
Further levels in both directions:
- Below: 1.0852, 1.0775, 1.0678 and 1.0588
- Above: 1.0961, 1.1004, 1.1124 and 1.1278
OANDA's Open Positions Ratio
USD/CAD ratio is pointing to gains in short positions in Thursday trade, continuing the direction seen a day earlier. This is consistent with the pair's current movement, as the Canadian dollar has posted modest gains. The ratio has a small majority of short positions, indicative of trader bias towards the Canadian dollar continuing to move higher.
USD/CAD Fundamentals
- 12:30 US Unemployment Claims. Estimate 302K. Actual 298K.
- 13:45 US Flash Manufacturing PMI. Estimate 55.7 points. Actual 58.0 points.
- 14:00 US Philly Fed Manufacturing Index. Estimate 19.7 points. Actual 28.0 points.
- 14:00 US Existing Home Sales. Estimate 5.01M. Actual 5.15M.
- 14:00 US CB Leading Index. Estimate 0.6%. Actual 0.9%.
- 14:30 US Natural Gas Storage. Estimate 83B.
- Day 1 - Jackson Hole Symposium.
* Key releases are in highlighted bold.
*All release times are GMT