Less Than Zero
Fundamentals
While it appears that the Federal Reserve is finally ready to implement an interest rate hike, potentially as soon as the end of the 2-day December Federal Open Market Committee Meeting (FOMC) on December 16, our neighbors to the north in Canada appear to be on a different trajectory for interest rates. Bank of Canada (BOC) Governor Stephen Poloz commented on Tuesday that should condition warrant, the BOC is prepared to move its key policy rate below zero! While it should be noted that Mr. Poloz stated that a move to negative rates is not being planned at this time, it shows that the BOC is prepared to act to help its moribund economy that has been hampered by lower Oil and commodity prices. It appears the Mr. Poloz wants to inform market participants that the BOC is prepared to use tools such as negative interest rates, like we are seeing in Europe, if necessary, as these ?unconventional actions? are being accepted by global central bankers. The Canadian Dollar fell to multi-year lows against the U.S. Dollar following Mr. Poloz?s remarks, as some traders apparently see few signs that the ?Loonie? is ready to fly higher given the divergent paths of the U.S. and Canadian economies.
Technical Notes? – View Today’s Chart
Looking at the daily continuation chart for Canadian Dollar futures, we notice prices have fallen to lows not seen since 2004, as continued weakness in the commodities sector has weighed on the so called ?commodity currencies? such as the Brazilian Real and Australian and Canadian Dollars. There appears to be some strong support between 0.7200 and 0.7000, with a chart ?gap? that may need to be filled down to 0.6967. The 14-day RSI is weak, but still holding above oversold levels, with a current reading of 31.27. The 2004 low of 0.7135 looks to be the next major support level for the front-month futures, with major resistance found at the October 2015 high of 0.7791.????
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