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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Friday, January 11, 2013

Trade Balance Deficit Widens for U.S. and Canada

Trade Balance data published today (Friday) shows an increased goods and services deficit for the U.S. and Canada, as shown on the graphs below.

It remains to be seen how these countries will grow their exports for 2013. Export demand and currency demand are important since "foreigners must buy the domestic currency to pay for the nation's exports...and export demand also impacts production and prices at domestic manufacturers."

The U.S. $ remains in a trading range, as shown on the Weekly chart below, in between the 50 (red) and 200 (pink) smas. At the time of writing this during market hours today, volumes have increased this week on the current bearish candle -- perhaps signalling/forecasting a further weakening of the dollar in order to stimulate demand for U.S. goods and services.

The USD/CAD forex pair remains in a large triangle formation, as shown on the Weekly chart below. At the moment, the U.S. $ is weaker and remains below parity. Rising prices on Oil and Lumber should continue to push the Canadian $ higher against the U.S. $ -- ultimately, favouring U.S. equities, and raising the cost of new homes, until the demand for them slows.

At the moment, Lumber is at 3-year highs (but the RSI, MACD, and Stochastics indicators are in overbought territory), and Oil is at resistance (the next major resistance level is 100), as shown on the Weekly charts below.

The Weekly chart below of the Homebuilders ETF (XHB) shows a desire of this market to break out to new 5-year highs, but price is at the top of a tightly-rising channel. The next major resistance level is around 30.00 -- one to watch for further direction, as any serious pullback in this ETF (and, possibly in Lumber and Oil) may negatively impact the equity market, in general.