BOC, Sluggish Metals Pressure the Loonie
?? Fundamentals
Canadian Dollar futures tumbled, after the Bank of Canada trimmed its growth forecast and suggested it may increase rates at a slower pace than previously thought. The weaker growth forecast comes as somewhat of a surprise, given the fact that Crude Oil and other commodity prices have been on the rise.
Canadian Government Bonds took a hit on the statement from the BOC, and currencies, in general, correlate strongly with their governments’ treasury instruments. Canada is auctioning C$2.9 billion of 20-year bonds on Wednesday, which should make this an interesting week for the Loonie.
If the auction is undersubscribed or softer than forecast, the Canadian Dollar could potentially continue its slide versus the greenback. In addition to the tamer growth forecast from the BOC, Canadian inflation hit a 3-year low of 0.8%. This may suggest that the BOC may be more aggressive with its monetary policy.
?? Technical Notes
Turning to the chart, we see the March Canadian Dollar future trading down through support near the 0.9940 level. The violent move lower confirmed a double-top on the daily chart and made the measured move of the pattern.
Longer-term, the close last week confirmed a doubletop on the weekly chart. The measure of the weekly double-top suggests prices could test the 0.9650 level on the downside. Thus far, prices have held support at the 0.9900 mark. Failure to hold support here could bring about a fresh round of selling.
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