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Will Canadian Dollar Collapses ?
Though Bank of Canada Governor Mark Carney made a statement that
an interest rate hike is likely "over time", there appears little
to signal this will occur anytime soon, especially following a
lowering of economic growth forecasts to only 1% in the third
quarter. However, technical chart patterns seem to indicate that
we may be close to a near-term bottom in the Loonie and a
short-covering rally may not be out of the question.
Fundamentals
The value of the Canadian Dollar vs. its neighbors to the south has been in a steady decline since the middle of September, as traders' "risk" appetites have waned due to continued disappointing global growth prospects and uncertainly ahead of the US elections. Domestically, the Loonie is flying into some headwinds, with Canada's 2013 growth outlook being cut to 2% and prospects for a tightening of monetary policy being pushed further into the future. Front month Canadian Dollar futures are now trading below parity with the U.S. Dollar for the first time since August, as continued slow global economic growth has started to lower the price outlook for commodities, which is viewed as negative for the Canadian Dollar. Chart technicians will note the Loonie's value is now approaching the 50% Fibonacci retracement level of the rally from the June lows to the mid-September highs. In addition, the Loonie is also testing the 200-day moving average, and should new multi-month lows not be made in the near future, we may start to see a recovery and the Loonie may once again resume its flight back towards recent highs.
Technical Notes
Looking at the daily continuation chart for Canadian Dollar futures, we notice prices trading near strong support levels at the convergence of both the 50% Fibonacci retracement and the 200-day moving average. In addition, the 14-day RSI is approaching oversold levels, with a current reading of 38.63. Should current support at 0.9970 fail to hold, we see the next support level at the 61.8% Fibonacci retracement near 0.9874, with resistance found at the 20-day moving average, currently near 1.0119.
Fundamentals
The value of the Canadian Dollar vs. its neighbors to the south has been in a steady decline since the middle of September, as traders' "risk" appetites have waned due to continued disappointing global growth prospects and uncertainly ahead of the US elections. Domestically, the Loonie is flying into some headwinds, with Canada's 2013 growth outlook being cut to 2% and prospects for a tightening of monetary policy being pushed further into the future. Front month Canadian Dollar futures are now trading below parity with the U.S. Dollar for the first time since August, as continued slow global economic growth has started to lower the price outlook for commodities, which is viewed as negative for the Canadian Dollar. Chart technicians will note the Loonie's value is now approaching the 50% Fibonacci retracement level of the rally from the June lows to the mid-September highs. In addition, the Loonie is also testing the 200-day moving average, and should new multi-month lows not be made in the near future, we may start to see a recovery and the Loonie may once again resume its flight back towards recent highs.
Technical Notes
Looking at the daily continuation chart for Canadian Dollar futures, we notice prices trading near strong support levels at the convergence of both the 50% Fibonacci retracement and the 200-day moving average. In addition, the 14-day RSI is approaching oversold levels, with a current reading of 38.63. Should current support at 0.9970 fail to hold, we see the next support level at the 61.8% Fibonacci retracement near 0.9874, with resistance found at the 20-day moving average, currently near 1.0119.
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