- Dollar in demand over Greek concerns
- “Atrocious” wholesale trade numbers predicted by Poloz
- Safe-haven trading fueled by USD pullbacks
- Market to remain nervous until Greek matter is settled
With the lack of fundamental releases this week, investors are hitching trading ideas to worries about Greece. The CAD is no exception. The loonie is trading lower Tuesday (CAD$1.2273) as the market moves out of risk-sensitive currencies and into the safe-haven U.S. dollar.
Poloz Expected Atrocious First Quarter
The CAD has been on a positive tear of late, supported by higher commodity prices and stronger economic data reinforcing the Bank of Canada’s (BoC) expectations of faster growth over the coming year. With fixed-income traders slashing the odds for another rate cut in the foreseeable future by the BoC, it allowed the loonie to take flight over the past week (CAD$1.2557-$1.2130).
However, data Tuesday morning has managed to put the loonie under pressure once again. Wholesale trade numbers for February were “atrocious” (Governor Stephen Poloz used this word to describe what data he was expecting for the first quarter), falling -0.4% versus an expected gain of +0.5%. The problem with this series of data is that it can be rather volatile, sometimes creating an over-trading environment.
Nevertheless, with the lack of economic releases and the ongoing Greek debt mess, it is pressuring commodity- and interest-sensitive currencies. The loonie bear has been badly stung by the currency’s appreciation after the BoC kept rates on hold last week. Traders on the wrong side of that experience are rather hesitant to get back into shorting the CAD, especially with liquidity being more of an issue this week. If anything, they do not want to chase their positions but would prefer the market to come to them.
Yesterday’s low (CAD$1.2180) continues to remain a strong support level for the greenback, while U.S. dollar resistance is well-noted at the psychological $1.23 level the first time around. With event risk uncertainty favoring the U.S. dollar, expect better selling of the CAD on USD pullbacks, at least until an outcome is known regarding Greek debt obligations and its continuing eurozone membership.