FALLING LOONIE FINDS A FLOOR
The Canadian dollar spent the last week under pressure, in part due to renewed fears that slowing growth in China would limit global economic growth. Those fears dissipated late last week and early this week following stronger PMI releases from China and the Euro zone and after a spate of US data releases, including today’s jobs data, came out stronger than expected, elevating expectations for US economic growth. The old adage of “what’s good for the US is good for Canada” appeared to be in vogue as the rallying USD/CAD appeared to run out of steam above par and the currency pair happily returned to trading within the 100 day moving average (0.9890) and the 200 day moving average (0.9972).
Next week, we will find out if “Superstorm Sandy” blew Barak back into the White House which would mean status quo at the Fed. If so, it also means 4 more years of “same-old; same-old”. Focus should shift back to Europe and whether or not Greece gets another cash infusion or if Spain will ask for a bail-out.
The short term USD/CAD technicals are bearish with the move below 0.9980 but need today’s dip below 0.9960 to be sustained, confirmed if the USD/CAD closes below that rate today. If so, 0.9960-0.9980 should revert to a USD resistance zone. A move above 1.0020 would suggest that a new USD bull leg is starting.
The Canadian dollar may find another element of support from EUR/CAD trading. EUR/CAD demand has contributed to the stronger USD/CAD in the past few days but the short term technicals show signs that the EUR/CAD uptrend is coming to an end. The break below 1.2870 in EUR/CAD argues for further weakness to 1.2570 which should help the USD/CAD stay below par.
And in other news the New York Marathon will go as scheduled on Sunday, despite half the city still devastated from Sandy. Apparently, city officials want to get the message out that “only half of New York is devastated and while it sucks to be them, is business as usual north of 42 Street.
Forecast Range for next Week 0.9880-0.9980
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