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 32 basis points to $0.7411, 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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