The Canadian dollar continued its descent against the US dollar. Why is the Canadian dollar falling today? While the previous fall came from domestic data such as weak retail sales and pessimism about the Canadian housing market, the current move is due to issues not related to Canada nor the US.
The elections in Italy could result in a hung parliament, and this has implications also on C$:
At first, a clear victory was seen for the center-left and pro-EU policies PD party. The PD party led by Bersani and the center party led by Mario Monti were expected to form a coalition that would continue the path of reform.
However, it now seems that the former PM Silvio Berlusconi could win the Senate (upper house) while the PD will win the lower house. In addition, Beppe Grillo’s anti-politician 5 Star Movement likely gained many seats. This could lead to new elections in the near future – a Greek like scenario.
So, EUR/USD crashed and worries were felt all over the world. When fears mount, the US dollar and the Japanese yen make gains, and the loonie is one of the losers.
Update: Also the governor of the Bank of Canada, Mark Carney, contributes to the downfall of the loonie. Speaking in London Ontario, Carney stated that Canadian data is “breaking to the downside”.
This is a continuation of a move that began in the previous week, when USD/CAD finally managed to break above 1.01. It then continued higher and closed above 1.02, but could could not break above the 1.0250 line.
The break came in the new week. USD/CAD is now trading at 1.0265, after having reached 1.0270. The next hurdle is quite close: 1.03. It is followed by 1.0360. At the moment, 1.0250 turns into support.
For more lines and events, see the Canadian dollar forecast.Get the 5 most predictable currency pairs