The Canadian dollar built up strength from a few factors and managed to break a minor support line. It’s now back to the levels that it was before the greenback comeback, but has bumps on the way.
USD/CAD now trades at 1.0520, after touching the round number of 1.0500. Since the beginning of the week, it made a move of over 200 pips downwards, and there are various reasons.
The drop began yesterday with the general dollar weakness. The G20 ministers are allowing the dollar to fall. This took USD/CAD down to 1.06, the support line mentioned in the weekly USD/CAD forecast.
Canadian housing starts, which disappointed many times in recent months managed to meet expectations and rise to 157K. The publication sent USD/CAD below the 1.06 support line, but it stalled at around 1.0540.
In today’s New York session, a fresh new wave of dollar weakness sent USD/CAD to 1.05, but it bounced and went higher again.
The Canadian economy is recovering slowly, similar to the American one. The recent negative monthly GDP hurt the Canadian dollar that had many reasons to rise. This wasn’t the only problem. Mark Carney, head of the BOC, released a as a dovish rate decision.
The latest disappointment in Canada was quite big: the Canadian job market lost over 40,000 jobs, more than the gains in the previous months.
The Canadian economy is recovering quite slowly, and the recent move downwards is mostly attributed to the weakness of the US dollar, rather than the strength of the Canadian one.
USD/CAD must close the week under the 1.06 line in order to convince traders that the Canadian dollar is strong, aiming for parity.
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