Canada Markets

Since reaching a high of $0.758391 CAD/USD on Dec. 28, the Canadian dollar has faced weakness against the U.S. dollar in 10 of 12 sessions. Today's close saw the spot dollar fall by basis points to $0.74, its weakest close since Dec. 13.

Today's session resulted in mixed signals for Canada's currency, with an uptick in Canada's inflation rate for December a supportive feature, while U.S. dollar strength and crude oil weakness teamed to weaken the dollar's trade against the USD.

Today's move breached the 38.2% retracement of the move from the October low to December high, calculated at $0.7437 CAD/USD, as shown by the horizontal red line. This clears a path for a further move to potential support at the 50-day moving average, calculated at $0.7399 CAD/USD, along with the 50% retracement of the same uptrend calculated at $0.7392 CAD/USD.

The Canadian dollar has weakened against the USD during the month of January in three of the past five years, averaging a 12-basis-point loss for the first month of the year. During the past 10 years, the loonie has weakened in January in six of the 10 years, averaging a loss of 91 basis points.

Equityclock.com, showing data for the past 20 years ending Dec. 31, 2023, shows an average return for the month of January of minus 0.6% during this period, the largest average monthly loss shown over the course of the year, while weakening in 70% of the 20 years. Over the 20 years, the maximum return is 3.9% and the minimum return is minus 8.7%.

The lower study on this chart shows the net-short futures position held by investors being pared for eight consecutive weeks to a net-short position of 7,380 contracts, as of Jan. 9, the smallest net-short position reported in five months.

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

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