Today’s Spotlight Market
The Canadian Dollar has been among the most popular risk currencies over the past five years. Traders’ love affair with the currency could be ending due to negative forecasts for the Canadian economy, which is expected to grow at a slower pace than much of the industrialized world. The recent growth concerns have resulted in some traders flocking to US Dollars in a flight to quality. The Loonie figures to be extremely sensitive to economic data; probably even more to negative data and earnings data.
Fundamentals
The recent bear run in commodities has put pressure on the Canadian Dollar, which is approaching early March lows. The Loonie is particularly sensitive to Crude Oil prices, the country’s largest export, so higher prices over the past three sessions have slowed the slide in the currency. The Canadian Dollar could be influenced by equity markets and economic data. Because of its relationship to commodities, the Loonie can be termed a risk currency. There are still a slew of earnings reports and economic data through the end of the week, which will likely result in increased volatility in the currency. The Canadian economy is expected to lag behind the rest of the globe, which could make risk-off selling particularly violent in the event that economic data is weaker. Some traders may, instead, favor the Aussie or Kiwi Dollars if they decide to delve into risk currencies.
Technical Notes
Turning to the chart, we see the June Canadian Dollar failing to maintain enough momentum to carry it above the 0.99 level and approach parity. Prices are now sliding towards relative lows near the 0.9675 mark. Failure to hold this level could bring heavy technical selling pressure.
Despite recent selling, the RSI indicator remains in neutral territory and is not showing oversold conditions. Closes below the 20-day moving average suggest that a near term high may be in place.
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