LoonieView$ – Weekly
Through Parity and Beyond….
January 26, 2012
RECAP: The Canadian dollar was happily confined to a 1.0060-1.0160 range until Wednesday’s FOMC meeting.. The FOMC announcement that US rates will be on hold until 2014 coupled with a tad less rosier economic outlook led to many concluding that we will get plenty more quantitative easing in the months ahead. In response, equity markets around the world have soared, Gold prices jumped over $60.00 and WTI crude pushed back above $100/bbl, all due to a rapidly falling US dollar as the “risk seeking” trade came back into vogue.
Technical Outlook: The Canadian dollar has flipped into full rally mode following the break of the strong support area between 1.0030-1.0060, which will now revert to resistance. This area encompassed support derived from the 200 day exponential moving average (1.0054); the 50% fibo retracement of the 0.9407-1.0650 range from July, 2011 and multiple trading lows from October. For now, the USD is in a steep (possibly weak)downtrend channel against the CAD$, bound by 1.0080 at the top and 0.9940 on the bottom.
LoonieView: The Canadian dollar is showing signs that it is in for an extended stay above parity to the US dollar. The apparent shift of global investors into full risk seeking mode predicated on the increasingly popular view that the FOMC is priming markets for QE III argues that US dollar weakness vs. the majors will persist, boosting the CAD$ and the other commodity currencies. Upside surprises to key economic data next week including jobless reports in Canada and the US will fuel CAD$ gains. Unfortunately developments in Greece or Iran or both could spoil the party.
Forecast Range for the Week 0.9880-1.0060