Recession Fears Keep Loonie Under Pressure
Today’s Spotlight Market? -? Lingering fears of a possible recession are keeping the Canadian Dollar below the .8000 level that the Loonie was recently struggling to hold. The sharp decline in oil prices has hurt Canada?s economy and the Bank of Canada announced a surprise rate cut in January. Traders and economists are speculating on the potential of yet another rate cut if Canadian economic growth remains sluggish.
Fundamentals? -? A recession is commonly defined as 2 consecutive quarters of negative GDP growth. Canada?s GDP for the first quarter declined at annual rate of 0.6% in the first quarter of 2015. In April, the Canadian economy shrank by 0.1%. Canada and the United States seem to be on different economic paths, with traders speculating on potential rises in interest rates by the United States Federal Reserve and the possibility of a rate cut by the Bank of Canada. The negative to slow growth in the Canadian economy may also influence upcoming national elections on October 19. On a more optimistic note, stronger United States growth in the second quarter and stabilizing oil prices could help stimulate the Canadian economy with a greater US demand for Canadian exports.
Technical Notes, View Today’s Chart? -? Turning to the 3 month continuation chart, the indicators show bears firmly in control. The 20 day Simple Moving Average (SMA) crossed below the 50 day SMA back in mid-June. The Canadian dollar is trading below the 20 day SMA and broke the previous support level of around .8000. Finally, RSI is in oversold territory at 25.43.
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