The sell off of the Canadian dollar accelerated with USD/CAD reaching a new high of 1.3493, breaking above the resistance line of 1.3460. Is 1.36 next?
Here are the reasons for the rise to the highest levels since June 2004.
- Disappointing jobs report: Canada reported a rise of the unemployment rate to 7.1% and a massive loss of 35.7K jobs, much worse than expected and erasing almost all the gains seen last month. This contrasted teh positive jobs report in the US. Both were released on Friday but we’ve seen the full reaction to both only now.
- Big trade deficit: Not only did Canada trade deficit come out worse than expected with -2.8 billion (1.7 billion was expected), the previous deficit is now seen as worse, 2.3 billion. Canada does not have a chronic trade deficit like the US, but it is certainly going that way with oil prices, and could certainly weigh on the loonie moving forward.
- Falling oil prices: While only few had expected OPEC to cut production, markets were still watching. When the outcome was the same as in previous meetings, meaningless, the flirts below the $40 level on WTI Crude Oil turned into a full breach. The new low is $38.47 with the August low of $37.73 awaiting us. The full effect of the fall is seen today.
More: USD/CAD weekly forecast
Here is how it looks on the chart:
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