The Canadian dollar had a pretty decent week as market participants were growing increasingly optimistic about the global economy and they were looking for higher-yielding assets to put their money into. The Canadian currency seemed as a good investment opportunity, especially after some very good economic news were released for the Canadian economy in the beginning of the week. On Tuesday, the building permits came in at -2.5%, declining at a much slower pace than analysts were expecting. At the same time the Ivey PMI for July soared to 62.8 from a reading of 49.0 for the previous month. This was the indicator’s highest level since April of this year. The USD/CAD declined on the news, pushing below the key 1.00 level since mid-May. On Wednesday and on Thursday, the appetite for risky assets continued to grow, even after the trade balance figures for the Canadian economy disappointed. The country’s deficit on the current account for the month of June widened to 1.8B from a reading of 1.0B for May. This was the lowest reading we have registered since November 2010. The NHPI indicated that the prices of new homes rose at a much slower pace than anticipated in June. Analysts were expecting an increase of 0.3%, but the prices advanced by only 0.2%. Investors saw these worse-than-expected data as just another indication that the central banks around the world will have to step in and provide additional stimulus to the struggling economies. The Canadian dollar continued to rise on these expectations, hitting fresh new highs against its U.S. counterpart in the late hours of yesterday’s session. The USD/CAD touched lows of 0.9901, which is the currency pair’s lowest rate since early May. Today, the Loonie lost some of its momentum as the data for the Canadian labor market were very disappointing. Economists were expecting the number of employed people in the previous month to have increased by 9.6K, but instead the number of employed dropped by 30.4K. At the same time, unemployment rate in the country rose to 7.3%, after dropping to 7.2% in July. The USD/CAD gained on the news, briefly trading above its 25-period moving average, but later the bears returned to the market as sentiment among market participants picked up again. The currency pair pared most of the advances it had posted earlier in the session and it is currently trading almost unchanged on the day at 0.9917.
Technically speaking, support in the USD/CAD is provided by the 0.99 level, while resistance is standing at the 25-period moving average around 0.9954. Oscillators are approaching oversold territory with the relative strength index around 35 and the stochastic at 28. The MACD is well below the key 0 level, approaching the lows, we saw in late July.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.