Canada Markets

The Canadian dollar received a boost in Tuesday's trade, with Canada's retail sales for May announced at a month-over-month gain of 1.9%, just about five times the gain expected by economists. The Canadian dollar gained 57 points in yesterday's trade.

Wednesday's news included disappointing data from China's "flash" Purchase Manager's Index, a preliminary report which precedes the official government data, although it is said to utilize almost all of the same data. This was reported at 47.7, an 11-month low, which indicated further contracting of the Chinese economy. This news weighed on global equity and commodity markets, leaving metals and energy commodities under pressure.

The Canadian dollar has traded within a downward-sloping bearish channel for just more than the past three months. As seen on the attached chart, the dollar tested the upper boundary of this channel, at a resistance level of $.9728 CAD/US dollar. While trade moved slightly higher today, selling pressure pushed prices back below the upper-channel boundary.

Prices also tested the resistance of the 38.2% Fibonacci retracement of the move from the Sept. 13, 2012 high of $1.0234 to the recent July 5 low of $.9409, which is shown on the attached chart at $.9724 CAD/US dollar. Again, prices breached this resistance although the move higher was met with selling pressure which pushed the exchange rate back below resistance.

One last test for the Canadian dollar today was the contract's 100-day moving average, shown by the black line while currently at $.9712. Today's move in the Canadian dollar saw the price trade above this 100-day simple moving average for the first time since June 19, although, once again, prices failed to hold.

Given the move in today's market, the short-term and intermediate-term down-trends remain intact. Yesterday's trade saw the loonie find support at its 50-day moving average which is at $.9642, which may be the next test of support.

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

(ES)

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