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USD/CAD Lifted after US Trade Balance Shows Narrower Deficit

USD/CAD Lifted after US Trade Balance Shows Narrower Deficit

Kevin Jin, Christopher Vecchio, CFA,

THE TAKEAWAY: USD Trade Balance (APR) > -$40.3B versus -$41.1B expected, from -$37.1B (revised higher from -$38.8B) > USDCAD BULLISH

US trade data for the beginning of the 2Q’13 was released this morning, and the headline Trade Balance figure has helped ease concerns, if only briefly, regarding the US economy and the state of global growth. The April Trade Balance came in at -$40.3B, beating expectations of a -$41.0B deficit, though the figure still showed a wider deficit than the prior -$38.8B. The March data was also revised upwards to -$37.1B.

Generally speaking, the trade balance gives a good indication of the health of domestic demand (imports) and global demand (exports). Of note, US imports for automobiles, cell phones, and other consumer goods rose, giving a mild hint towards a bettering Japanese trade situation. Furthermore, the gains suggest that business and household spending alike are being revived, which could help the US economy push through the government’s budget sequestration – which has implications, then, for the pace of the Fed’s QE3 program.

USDCAD 1-minute Chart: June 4, 2013

USDCAD_Lifted_after_US_Trade_Balance_Shows_Narrower_Deficit_body_x0000_i1027.png, USD/CAD Lifted after US Trade Balance Shows Narrower Deficit

Charts Created using Marketscopeprepared by Christopher Vecchio

Similarly, the US is Canada’s largest trading partner, and the Canadian International Trade report was released at the same time as the US trade data, coming in at -$0.57B (expected: $-0.50B; prior: -0.02B). Although this piece of Canadian data is not as closely looked at as its US equivalent, the aggregate impact of this data started to push the USDCAD higher from C$1.0308 to as high as 1.0323, at the time this report was written.

These were the only significant US and Canadian data today, and all eyes remain fixated on Friday’s May US labor market report.

--- Written by Christopher Vecchio, Currency Analyst, and Kevin Jin, DailyFX Research

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.