USD/CAD – Loonie Swoon Continues After Weak Canadian Numbers

The US dollar continues its impressive rally against against the Canadian currency. Early in Monday’s North American session, USD/CAD was trading in the mid-1.05 range. We have not seen the Canadian dollar at such low levels since October 2011. In economic news, the week is starting off very quietly, with no releases out of Canada or the US on Monday.

Canadian inflation and retail sales numbers were a big disappointment on Friday. Core CPI posted a gain of 0.2%, missing the estimate of 0.3%. CPI also gained 0.2%, shy of the 0.4% estimate. Core Retail Sales slumped to a five-month low, declining by 0.3%. The estimate stood at 0.0%. Retail Sales rose 0.1%, missing the forecast of 0.2%. The figures point to continuing weakness in the Canadian economy, and the US dollar sent the loonie tumbling in response to the poor Canadian numbers. The Canadian dollar has lost close to four cents in the past week.  

Speaking in London last week, Japanese Prime Minster Shino Abe defended his government’s aggressive monetary easing policy. The government wants to kick-start the stagnant Japanese economy and stamp out deflation. Abe has defined his aggressive economic policy has having three prongs: extreme monetary easing, fiscal stimulus, and pro-growth moves. However, deflation has proven to be a stubborn enemy and continues to hurt the economy. Japan’s trading partners are not happy with the sinking yen, which has hurt their export markets. Abe dismissed criticism that he is purposely pushing the yen lower, saying that Abenomics is a win-win for the global and Japanese economies. He noted that GDP in Q1 climbed 4.1%, which he argued is proof that the Japanese economy is showing improvement.

 

USD/CAD for Monday, June 24, 2013

Forex Rate Graph 21/1/13
USD/CAD June 24 at 13:00 GMT

USD/CAD 1.0514 H: 1.0554 L: 1.0478

 

USD/CAD Technical

S3 S2 S1 R1 R2 R3
1.0337 1.0442 1.0502 1.0652 1.0705 1.0780

 

USD/CAD continues to move to higher levels, and pushed above the 1.05 line earlier on Monday. The pair is testing support at 1.0502. This line could fall if the Canadian dollar can show any signs of recovery. The next support level is at 1.0442. On the upside, the pair faces resistance at 1.0652. This line has remained in place since October 2011. The next line of resistance is at 1.0705.

  • Current range: 1.0502 to 1.0652

 

Further levels in both directions:

  • Below: 1.0502, 10442, 1.0337, 1.0282, 1.0229 and 1.0157
  • Above: 1.0652, 1.0705, 1.0780 and 1.0933

 

OANDA’s Open Positions Ratio

USD/CAD ratio to point to strong movement in favor of short positions. This trend has continued for the past week, as short positions now are a majority. This is to be expected, as sharp losses by the loonie have resulted in a lot of long positions being covered. We could see this movement in the ratio continue if USD/CAD loses more ground.

The US dollar continues to post gains against the retreating loonie. How high can the greenback go? There are no major releases from Canada or the US on Monday, so we could see the pair trade quietly during the day.

USD/CAD Fundamentals

  • There are no releases from the US or Canada on Monday.

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.