Before we concentrate on today’s releases, let’s first explore what happened to the Loonie in the course of the week. Monday was a pretty choppy day for the high-yielder as the markets in Canada were close for a public holiday. The currency pair moved in tight range, touching highs of 1.0200 and lows of 1.0150. The following two trading days were also rather quiet for the USD/CAD as no economic news were scheduled to be released for the Canadian economy and as investors were staying predominantly on the sidelines, expecting the ECB meeting, scheduled for later in the week and the U.S. employment data due on Friday. The Loonie, however, moved slightly lower on Tuesday, starting the day around the highs and ending it very close to the lows of 1.0115. On Wednesday the currency pair moved in a very tight range, but it still managed to post fresh new lows for the period after May 16th. Thursday also didn’t provide any news for the Canadian economy, but the slew of data for the European economy had its impact on the high-yielding Canadian currency. As investors chose to move away from risky assets and put their money into lower-yielding assets the Canadian dollar declined against its American counterpart, but the move was not as sharp as the one in other currencies such as the euro for example. The USDCAD marked a fresh new low for the aforementioned period once again, trading for a while below the 1.0100 level.
Today a battery of economic data was released for the Canadian economy, all of which came in much better than expected. The building permits on a month over month bases soared to 7.4%, a reading more than 10 times above what economists were projecting. At the same time, the figures for the previous month were revised upwards to – 4.4% from – 5.2%. The employment change numbers also surprised on the upside, coming at 7.3K, way ahead of the analysts’ projections of 5.1K. The unemployment rate was the third piece of economic data that investors saw improve in the month of June. According to the Statistics Canada the percentage of the total work force that was unemployed and actively seeking employment declined to 7.2% from a reading of 7.3% for the previous month. Economists were expecting the unemployment rate to remain unchanged. After all these positive news the currency pair was expected to continue to trend lower, but the bad economic data for the U.S. economy turned out to be shaping sentiment across investors and they chose to run to lower-yielding currencies, instead of putting their money into Canadian dollars.
As traders run to buy U.S. dollars the USD/CAD jumped higher, pushing above its 25-period moving average for the first time since June 28th. The currency pair even traded above its 50-period moving average at one point, touching highs of 1.0200, but later on it pared some of its gains to trade at the current rate of 1.0194. Support in the Loonie is provided by the 25-period moving average, while resistance stands at the 200-period moving average around 1.0255. Oscillators are all trending higher with the relative strength index at 63 and the stochastic in overbought territory, standing at 84. The MACD has moved away from the lows it marked in the beginning of the week and is currently approaching the key 0 level.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.