Foreign Securities Purchases, which express the level of confidence that foreigners put in Canada, jumped to 12.36 billion, much higher than 2.87 billion Canadian dollars that was expected. This keeps USD/CAD in the lower range it reached, eying parity once again.
After a month in which foreigners took money out of Canada, they now showed great confidence. This has a few factors. First, the Canadian rate hike meant that holding Canadian dollars became more attractive.
In addition, the Russian central bank began purchasing Canadian dollars. They want to diversify their reserves, and not be dependent on dollars and euros alone. They also began buying Australian dollars.
Another reason for foreign confidence in Canada is the state of the economy. Canadian employment and GDP are improving at a satisfying rate, better than their neighbor from the south.
USD/CAD began a move downwards on risk appetite. The loonie enjoyed the appetite for risk. Stocks are rising, and the Euro is ignoring the bad news that comes out of Spain. More risk appetite – less demand for US dollars, more demand for the loonie.
The price of oil, that Canada is dependent on, is also on the rise. Crude oil passed the $76 mark, and is at the highest levels since the beginning of May. It still needs to rise above $80 for USD/CAD to make an attempt on parity.
USD/CAD is bound between two strong lines – 1.04 from above, which worked as a support line just last week, and 1.02 from below. 1.02 was the 2009 low, worked many times as a support line, and as a strong resistance line as well, after the pair reached parity.
A loss of 1.04 will lead the pair towards 1.0550, and a break below 1.02 will open the road for parity, last seen in April. The loonie has the reasons to return to parity. Another calm week without terrible European news will send USD/CAD lower.
The situation in Canada is excellent, and it suffers only from global fear. Without fear, the loonie rises.
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