LoonieViews July 26, 2012

July 26, 2012
USD/CAD Open 1.0105-10 Overnight Range 1.0075-1.0165

The Canadian dollar and the rest of the majors had a pretty quiet overnight session but activity quickly spiked around 6:05 am when ECB President Draghi’s comments hit the newswires. Headlines like “…the Euro is irreversible”, “…don’t underestimate political capital in Euro” … believe me, it will be enough”, spooked EUR bears, triggering a slide in the US dollar vs the majors. The CAD$ rallied from 1.0150 to 1.0075 within an hour. The US dollar was already wobbly ahead of a ton of data releases, which would underscore the weak economy. The data includes: Durable Goods Orders (June Forecast 0.3%, ex Transportation 0.1%), Initial Jobless Claims (forecast 380K), Pending Home Sales (June 0.3% MoM). Global equity indices including NY equity futures are all positive. WTI oil is $89.44 and gold is up $14.60 to $1,618.65

The short term USD/CAD technicals are bearish USD. The break of hourly support at 1.0140 and the subsequent move through the 200 day moving average at 1.0105 opens up an assault on the solid 1.0040-60 support zone. A decisive move below 1.0040 argues for a test of 0.9940 and then 0.9805. Only a return above 1.0210 will negate the pressure. For today, USD support is at 1.0075, 1.0060, 1.0040 and 0.9980. Resistance is at 1.0110, 1.0140 and 1.0160.

The Canadian dollar is benefitting from the combination of fears of weak US data re-enforcing the US economic slowdown theme and hopes that the ECB and politicians get stop the bleeding in the Euro zone. In addition, the potential $15.1 billion in pending Canadian dollar demand by CNOOC won’t hurt loonie upside.

And in other news, Citibank is assigning a 90% probability that Greece will leave the EUR in 12-18 months. They should know as they were a mere 12-18 hours from leaving the world of corporate entities in 2008. It takes one dead beat to know another.

Michael O’Neill


Categories FX, Foreign Exchange, Currency, Canadian Dollar

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