Loonie Drops as Fires Rage
Today’s Spotlight Market
The Canadian Dollar has dipped toward the 0.7700 level on falling commodity prices and negative growth outlook. Crude Oil prices were bolstered by the Fort McMurray wildfire, which has severely crippled output in the region. Oil prices were acting as support for the Loonie, but they have now pulled back.
Fundamentals
The Fort McMurray tragedy resulted in GDP projections being scaled down a bit for the quarter. Analysts are now looking for flat growth in Q2 instead of the very modest growth previously expected. The IMF actually revised up its 2016 GDP forecast to 1.75% from 1.50%, but the group updated this estimate prior to the Alberta wildfires. There are still some points that can be taken away from the IMF?s assessment. Canada has done a great job coping with the Oil shock and the economy has been resilient, despite Oil and other raw material prices being weak. It will be interesting to see how the economy can cope with the devastation of the wildfires. There is no other natural disaster in the country?s history to compare the fire to. Currently, roughly a third of the country?s Oil production has been hampered by the fires. TD Bank suggests the disaster could affect unemployment to the tune of 0.2 percent. There has been some talk that further stimulus could be needed to reinvigorate the nation?s economy.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the June Canadian Dollar breaking through its uptrend line as well as near-term support at the 0.7775 level. The next significant support area comes in around the 0.7500 level. The recent closes below the 20-day moving average suggest that a near-term high may be in place. Prices are trading slightly above the 50-day moving average. Significant closes below the average could be interpreted as adding to near-term bearish sentiment.
——————————————————————————————–
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the “Disclosure Statement for Futures and Options” prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.