More than 700 points after the USDCAD began its near non-stop rally, the pair seems to finally have run out of technical steam. In fact, the pair spent all of last week range bound below a major falling trendline from May 2004’s swing high (now holding around 1.0750).
[B]Canadian Dollar May Secure Bullish Reversal With Data[/B]
[B]Fundamental Outlook for Canadian Dollar: Bullish[/B]
- Record breaking declines in commodities can’t seem to rouse the Canadian dollar
- Sentiment data shows retail traders net long USDCAD after the pair stalls
More than 700 points after the USDCAD began its near non-stop rally, the pair seems to finally have run out of technical steam. In fact, the pair spent all of last week range bound below a major falling trendline from May 2004’s swing high (now holding around 1.0750). Going forward, this level will likely stand as a reminder that such a trend can’t subsist on dollar momentum alone. To score another major breakout and sustain the pair’s impressive trend, the Canadian dollar will need to contribute to the move with weakness of its own. As it stands, if the US dollar’s overwhelming advance fades, the strength in the loonie seen with EURCAD, AUDCAD, CADJPY and other liquid pairs will no doubt spread to USDCAD. In fact, the currency’s strength has been so prominent (barring the performance of the major pair) that it has weathered a sustained drop in the key correlation commodities - crude below $115/barrel and gold under $800/oz.
While the US dollar may have a say in direction, economic data holds the keys to volatility and momentum. While the global economic calendar looks relatively sparse, the Canadian docket will entertain a couple standout releases – both of which could alter the outlook for Canadian interest rates. The heavy-hitting data will start to cross the wires on Wednesday with the release of the Leading Indicators composite and retail sales figure. The former sounds influential as a forecast for growth over the coming three to six months, but it has certainly lacked oomph for some time. Consumer spending on the other hand is a key component to growth, which has come under the microscope with business investment, employment and housing construction slowing. Taking weight on the other side of the monetary policy scale, the CPI numbers are expected to balloon with Thursday’s reading. If expectations of a 3.4 percent headline pace of annual price growth is realized, it would mark the highest level of inflation in over five-and-a-half years. – JK
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