USD/CAD Closer to Parity on Japanese Catastrophe

The Canadian dollar is suffering from the earthquake in Japan, from to different aspects. USD/CAD parity isn’t too far. Update on the Canadian dollar.

The horrible catastrophe in Japan is still evolving. Apart from the massive amount of casualties from the earthquake and the tsunami, Japan’s nuclear power stations are still causing great worries of a total meltdown. The immense damage that already happened, and the potential for more, mean weaker global demand.

Fear, with lower global demand, trigger risk aversive trading. The Swiss franc benefits a lot, but also the US dollar enjoys some gains.

The Canadian dollar suffers from the flight to US dollars, and also from the falling prices of oil. It’s not that Middle Eastern trouble is over – the crisis in Bahrain is deepening, and the violent crackdown of Shiites could ignite protests in other Persian Gulf countries. Iran could fuel protests in Qatar, the UAE and in Saudi Arabia.

Nevertheless, the Japanese troubles mean a slowdown for other countries in Asia as well. These countries have been quite “oil thirsty”. As an exporter of oil, Canada suffers also from the decline in oil prices, which have lost their extra digit.

USD/CAD is currently under 0.9930 – the 2010 low that turned into resistance in recent weeks. It temporarily breached this line, but retreated. On the way, USD/CAD broke above 0.98, which was a strong cap before the earthquake.

Above 0.9930, 0.9977 is a minor resistance line, but much stronger resistance is the obvious line of parity. 0.98 is now support, if things improve.

For more technical levels and events in Canada, see the Canadian dollar forecast.

For more about the USD/JPY, see Fear of Major Nuclear Catastrophe Sends USD/JPY Under 80