Loonie Divergence
Today’s Spotlight Market
While most of the economic data for the United States has been positive, particularly job creation and a falling unemployment rate, Canada has seen a decidedly mixed bag of economic numbers for 2016. Falling commodity prices have hurt the Canadian economy, which is just now slowly emerging from a brief period of recession.
Fundamentals
All signs point to a United States Federal Reserve rate hike in December. The Bank of Canada, however, left rates unchanged at .5%. The Bank of Canada has cut rates twice this year, while the United States has remained unchanged, albeit at zero. The Canadian economy exited their mild recession with growth resuming at a 2.3% annualized rate for the third quarter. This divergence between two neighboring economies has been reflected in the price of the Canadian Dollar, which has fallen below .75 recently.
Technical Notes? -? View Today’s Chart
Turning to the 3-month continuation chart for the Canadian Dollar, most technical indicators are showing a bearish trend. The 20-day SMA is providing a resistance level and the curve is sharply downward. The 20-day SMA is not only below the 50-day SMA, but the divergence between the two moving averages is increasing. The current support level, near .74, is below the previous .75 level. The 14-day RSI is a bearish 34.21.
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