Canada Markets

The spot Canadian dollar reached an eight-week high on Dec. 1 but has since struggled. For the second time in six sessions, the spot dollar has breached the support of its 100-day moving average, closing 14 basis points lower at $.735537 CAD/USD, for its lowest close in 11 sessions.

The 100-day moving average has challenged the spot dollar since August. This resistance was tested on Aug. 10 and failed to sustain a higher move while the exchange also failed at this resistance on Sept. 19-20. The exchange moved above the 100-day once again on Dec. 1 and Dec. 4 and again Dec. 11 while failing to sustain the move in today's trade.

Potential support is seen at $.7330 CAD/USD, the 38.2% retracement of the move from the Oct. 31 low to the Dec. 1 high (horizontal red line). A breach of this level could see a move to the 50% retracement at $.7306 CAD/USD, which is also equal to the 50-day moving average. Since Aug. 1, the 50-day has also played a role in resisting a move higher.

The lower study shows noncommercial traders or investors paring their bearish net-short position in Canadian dollar futures for a third consecutive week as of Dec. 5. Over three weeks, the speculative trade has reduced this bearish position by 18% after reaching the largest bearish position seen since June 2017 in mid-November. Today's selling could lead to a sharply larger net-short position when the CFTC reports on Friday.

Crude oil weakness is a bearish drag on the Canadian dollar. The nearby January contract reached a five-month low today after seven consecutive lower closes on the weekly chart.

Focus this week will also be on Wednesday's Federal Reserve rate decision. Pre-report estimates seem to be leaning toward rates held steady this month while every word will be digested for hints of what is to come.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com.

Follow him on X, formerly known as Twitter, @CliffJamieson.

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