July 25, 2012
|USD/CAD Open 1.0185-90 Overnight Range 1.0175-1.0230The Canadian dollar stayed soft in Asia and rallied in Europe in line with the trading patterns of the other G-7 currencies. The Asian session continued the negative bias from yesterday however the Euro zone session was the exact opposite. The combination of thin markets and dubious Euro zone headlines led to a round of profit taking as the US dollar was sold. An ECB policy member opined about converting the ESM (European Stability Mechanism) into a bank, leading to traders buying EUR on the perception of the possibility of increased firepower to support troubled sovereigns. ECB President Draghi reportedly said that such a move was illegal on May 24. Meanwhile, European equity indices rose and NY equity futures are in the green. WTI oil is $88.56 and gold is $1,590.53. There isn’t any data of note from Canada or the USA.
The short term USD/CAD technicals are mixed. The medium term USD/CAD trend is bearish as evidenced by the downtrend channel (channel parameters are 1.0020 and 1.0240) on the daily chart below. For today, USD support is at 1.0170 and 1.0140. Resistance is at 1.0200, and 1.0220.
The Canadian dollar will continue to be supported by expectations of demand from the CNOOC/Nexxen deal. If you have any doubt about the possible impact of a conversion of this magnitude, look back to Oct.-Nov.07 and review the result of the ALCOA/Alcan deal. History does repeat itself.
And in other news, Premier McGuinty denied additional funds for Toronto to combat guns and gangs because he spent the money to buy votes in troubled Liberal ridings.
Today’s Range 1.0160-1.0210