The Canadian dollar made huge gains against the US dollar this week. USD/CAD has a new direction – south. This happened on ok data in Canada, and the greenback’s weakness across the board. Here’s a roundup, and a look forward.
As I wrote at the beginning of the week, it indeed was an important week for the Canadian dollar. A new direction was set – south.
USD/CAD began the week between 1.1750 to 1.18, clinging to last week’s close. It then began deteriorating, as the greenback began falling.
Major support broken
On Wedneday noon, Canadian Core CPI was within expectations. This gave accelerated the drop from 1.1550 to below 1.15. This was the break of the narrow range that I spoke about last week.
Another push down came with Geithner’s speech. This move, a short time later, confirmed the breakout, and sent the pair under 1.14.
On Thursday, Foreign Securities Purchases and Wholesale Sales were better than expected, but the US dollar was retracting. USD/CAD went again over 1.14.
This small retraction was short lived, and USD/CAD went under 1.1350 – new lows, but the break of such a major line couldn’t be stopped.
The next break came around the publication of Canadian Retail Sales and Core Retail Sales. The core figure fell by 0.2%, as expected. During the hours before and after this release, US dollar weakness was felt everywhere.
USD/CAD kept falling, and trades at 1.1198.
What’s next for USD/CAD?
Well, after breaking the major 1.1470 line, the next resistance is only at 1.0750, which served as a strong resistance line during a few months in the summer of 2008. We may see some upwards correction, but overall, there’s lots of space for renewed falling.