The Canadian dollar doesn’t bow before the US Non-Farm Payrolls. USD/CAD made a break lower, and is now trading at the lowest levels since November 2007. Here are 3 reasons for move.
USD/CAD is now trading at 0.9650, breaking below the previous levels of around 0.9680, and confirmed the break below the 0.97 line. The next level below is 0.96. 0.97 turns into resistance, followed by 0.98.
Why is loonie rising?
- Canadian growth is solid: The first report for Q1 of 2011 was released this week, for the month of January. It showed that growth in Canada is at a strong pace of 0.5% per month. The initial reaction was mild, but the market now digests it.
- Oil prices rise: After being stuck below $107, the price of WTI Crude Oil rose above this level, on fresh Middle Eastern worries that come from Libya and Syria. The Libyan civil war is at a standstill. Syria is witnessing another big day of rage. Canada’s oil exports enjoy higher oil prices.
- Improved US Economy: the factor that made the break for the Canadian dollar is its southern neighbor. Canada doesn’t depend only on oil, but also on the American consumer. A stronger US economy means a stronger Canadian one. With Non-Farm Payrolls finally exceeding expectations, and the unemployment rate continuing to fall, the Canadian exporters can be encouraged.
All in all, the Canadian economy is doing really well. The last employment report in Canada showed a very healthy job market. Housing is stable and manufacturing has recovered.
The next big test for the loonie is next week’s job figures. They are released separately from the American ones this time. This will give leave the stage for the Canadian dollar.
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