|LoonieViews- No Draghi on CAD$ Gains
September 6, 2012
|The Canadian dollar flirted with support in the 0.9840-60 zone ahead of Mario Draghi’s remarks and has since retreated modestly as FX traders attempt to ascertain whether or not they like the developments. Draghi has obviously failed to conjure up an instant game changing solution to the European debt crisis, yet he appears to be on the right track. This will be good news for CAD$ bulls. Continued US dollar weakness against the majors combined with firm and rising oil prices and lurking massive demand for CAD$ from the CNOOC $15.1 cash bid for Nexxen will not only put a cap on CAD$ weakness, but eventually drive USD/CAD down through support at 0.9440.The medium and long term USD/CAD technicals are bearish USD. Fibonacci retracement analysis projects a move to 0.9440 (100% retracement of 0.9440-1.0640 range from June, 2011. In addition, the USD/CAD is in a well establish downtrend, currently bound by 0.9760 on the bottom and 0.990 on the top.
The Canadian dollar will likely trade within the 0.9840-0.9940 range until next week’s FOMC meeting. If Ben Bernanke delivers some form of QElll, renewed USD selling will occur. The double whammy of ECB bond purchases and QElll should drive the loonie below 0.9800.