The Canadian dollar saw heavy trading for most of last week as stabilizing oil prices, waning risk appetite and comments from BoC governor Carney all weighed on sentiment. The central bank leader the week before expressed concern over the level of appreciation of the “loonie” against the dollar making its country’s goods less desirable for its main trading partner the U.S.,. He would leave the door open for possible intervention which despite his acknowledgement of its shortcomings.
Canadian Dollar May Follow Commodity Prices Lower
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Fundamental Forecast for Canadian Dollar: [/B][B]Bearish[/B]
-Canadian International Securities Transactions Rose to 9.048B From 7.192B
-Head & Shoulders Formation Could Signal More Losses For USD/CAD
The Canadian dollar saw heavy trading for most of last week as stabilizing oil prices, waning risk appetite and comments from BoC governor Carney all weighed on sentiment. The central bank leader the week before expressed concern over the level of appreciation of the “loonie” against the dollar making its country’s goods less desirable for its main trading partner the U.S.,. He would leave the door open for possible intervention which despite his acknowledgement of its shortcomings. Nevertheless, the recent attempts by the SNB to depreciate their currency for the same reasons gave traders food for thought. The only fundamental release in the week was the International Securities transactions report which showed a jump to 9.048B from 7.192B as foreign investors increased their demand for Canadian assets. The investment in the Canadian economy can be seen as a bullish sign and supports recent comments from Finance Minister Flaherty.
Recent signs of a recovery in China and the U.S. has led the OECD to raise its outlook for the global economy which raised the outlook for future demand for commodities. However, we may have send the end of the recent rise in demand for raw materials as it is believed that China is near completion of its stockpiling of resources. Therefore, unless we see a significant pick up in global growth, prices may be in store for a retrace which could sink the Canadian Dollar. Risk appetite to end the week and talk from China of replacing the dollar as a reserve currency may be masking building “loonie” weakness. The upcoming GDP report for April is expected to show a 0.1% contraction, which would be the ninth straight month of negative growth. This could reignite bearish Canadian dollar sentiment, but we wait to become bullish on the USD/CAD until we see a break above 1.1638-the 50.0% Fibo of 1.2509-1.0781. Until, downside risks remain with a possible test of support at 1.1214 the 20-Day SMA-JR