FX Morning Update August 19, 2011

USD/CAD Open: 0.9912-15 Overnight Range: 0.9881-0.9930

The Canadian dollar traded sideways for the most part overnight. Asian and European equity markets were down. Canadian inflation today came in mainly in line with expectations at 2.7% Act. vs. 2.8% F and core CPI in line. Yesterday, Philly Fed index data was negative showing a contraction causing concern about Q3 growth, this was the lowest data point since March 2009. Weekly jobless claims data came in worse than expected indicating a weak labor force. NY futures are pointing lower. Oil is lower at $81.90 and gold is higher at $1,862. Canadian Finance Minister and Governor Carney will speak to parliament this morning. There are no major US data releases today.

The short term Canadian dollar technicals remain negative. The loonie has been resilient around the 0.9900-0.9950 level. For today, USD resistance is at 0.9955, 0.9974, and 0.9999. Support is at 0.9905, 0.9850, 0.9806, 0.9750 and 0.9667.

Growing fears of a recession backed with weaker than expected US data caused equity markets and oil prices to tumble. Despite the sharp drop-off, the USD traded around 0.9900 for the most part and did not move extremely close to parity, showing there are buyers of the loonie in these markets at these levels and in these conditions. Greece is also working on a financing deal with Finland for aid support, which needs eurozone approval. Negative sentiment is capturing headlines but the loonie has been resilient. Canadian dollar bulls are hoping for the global economy to muddle through this softpatch, oil prices to rise as China continues to grow, potential stimulus to boost confidence in equities, and the Bank of Canada to hint at raising rates later this year or early year. Canadian dollar bears are see persistent economic weakness as a sign that we could be heading in to another recession and continued uncertainty will help the USD gain strength as a safe haven currency. The loonie should follow equities and oil prices and we may eventually see some bargain hunting next week after a sharp selloff.

Today’s Range: 0.9825 – 0.9925

By Admin | September 11, 2011 | Daily Update | 0 comments

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