More Rocky Times Ahead For Loonie?
Today’s Spotlight Market
Short positions in the Canadian Dollar have been building over the past several months.? The Commitment of Traders report has shown an increase in the speculative net short position in 8 of the last 10 weeks.? This is not necessarily due to any specific set of economic data in Canada, but, rather, is based off of US fundamentals.? Friday?s non-farm payroll report was better than expected, leading to speculation that the Federal Reserve may raise interest rates more quickly than previously expected.? Dallas Fed President Richard Fisher said policy makers should raise rates sooner rather than later and aggressively.
Fundamentals
The Federal Reserve raising interest rates aggressively could have a double negative impact on the Canadian Dollar.? Obviously, a stronger Dollar will naturally sink the Loonie.? A stronger greenback could also sink Crude Oil prices even further, which could have a negative impact on the Canadian economy.? The Canadian economy has held up very well, despite weaker Oil prices, and it is the third best performing G10 economy.? What has some traders concerned is that the full impact of the breakdown in Crude Oil prices may not have shown up in jobs figures just yet.? This Friday?s Canadian jobs report from Statistics Canada may give traders a better idea of the health of the Canadian labor market.? Analyst estimates are fairly optimistic, but there are some dangers in addition to possible losses in the Oil sector.? Several large retailers have had closings and many believe this impact has not yet been felt, which could be seen as a wildcard.???? ?
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the Canadian Dollar consolidating in a wedge formation.? Given the preceding downtrend, the bias for a possible breakout may be seen as favoring a downward breakout.? Prices have been centered around the 20-day moving average, so deviation from the average could be seen as hinting toward the near-term market direction.
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