The Canadian dollar is weakening and USD/CAD breaks the 1.04 level to reach the highest value since July 18th. It is getting close to resistance.
A stronger US dollar and a fall of the oil prices are the main reasons for this moves. Important Canadian release await the loonie.
USD/CAD found a bottom at around 1.0250 in late July, but couldn’t break lower. It moved higher, settling above 1.0350, and now it spiked higher.
Resistance appears at 1.0446, which was a peak last year and also worked as such in early July. Further resistance is at the round number of 1.05, followed by 1.0550. Support is now at 1.0350.
The price of oil fell to $105. This isn’t a low price, but crude oil is already off its highs and seems unable to push higher. Canada is an exporter of oil. For more on oil, see Trading NRG.
Another reason is the stronger dollar: FOMC member Charles Evans, who is usually a dove, mentioned tapering in September. Hawkish comments from a dove move markets. In addition, the US trade balance deficit fell to the lowest since 2009 and will certainly add to GDP calculations, also boosting the greenback.
It’s important to note that the USD is not alone: also the Japanese yen is strengthening. It isn’t exactly a “risk off” environment, but rather a strengthening of the yen due to a plunge in the Nikkei index. So, CAD/JPY is making an even stronger move now, to the downside.
Canada will release official building permits, which are expected to drop by 2.5% after rising 4.5% beforehand. And, the the Ivey PMI is expected to advance from 55.3 to 56.3 points.
The bigger event is the publication of employment data on Friday. All in all, the Canadian economy looks quite healthy, but the loonie cannot withstand big global moves like we are seeing now.
For more, see the Canadian dollar forecast.
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