Loonie Taking Off In The Great White North
Today’s Spotlight Market
The Canadian dollar slid early this year, as the sharp decline in oil prices in late 2014 caused the Bank of Canada to cut rates by 25 basis points in January. As oil prices have rebounded, the Canadian dollar has bounced back off the March lows.? The stabilization in oil prices should be a boon to the Canadian economy.
Fundamentals
The Canadian dollar was trading near parity with the US dollar as recently as May of 2013. Since then, the Canadian dollar has been weakening, with a sharp drop in January of 2015 after the Bank of Canada announced a surprise rate cut on January 21, 2015 from 1% down to .75%. It is quite unusual for a major central bank to make rate cuts without preciously indicating their intentions. The result of this cut shocked the market, as the Canadian dollar traded in an extremely wide range that day, from a high of .8279 to a low of .8063. Many investors were nervous about the possibility of a second rate cut, but the recent strengthening in the Loonie as well as comments from Stephen Poloz, a Bank of Canada Governor, indicate that a second rate cut is not currently on the table.
Technical Notes? -? View Today’s Chart
Looking at the daily 6-month continuation chart, the Canadian dollar is now trading above both the 50- and 20-day simple moving averages, indicating a bullish trend. The 20-day simple moving average recently crossed above the 50-day simple moving average, another bullish trend. Support can be found at the .7804 recent low, and resistance at .8260. The 14-day RSI is quite bullish at 66.27, nearing overbought territory.
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