Canada Markets

Since reaching a low of $.8845 CAD/USD March 20, the Canadian dollar rallied 4.4% or 395 points to reach a high of $.9240 CAD/USD March 8. The market has since run out of steam, which resulted in an initial breach of trendline support in Tuesday's trade, while Wednesday's trade started with an open below trendline support with trade ending 18 basis points lower at $.9155 CAD/USD.

Technical signs on the daily chart indicate the possibility of further weakening. As shown on the second study on the attached chart, stochastic momentum indicators posted a bearish cross-over of indicators while in the over-bought area of the chart, above 80%, which took place May 9. These indicators continue to indicate downside momentum.

The lower study indicates an on-going net-short position held by non-commercial traders or investors. This group has held a net-short position since February 2013, or 64 weeks in total. The average short position held was 38,443 contracts, while most recent data indicates a net-short position of 26,037 contracts. While these positions have been pared since the net-short position of 70,327 contracts were held in January, these investors continue to bet against the Canadian dollar.

One further sign of weakness is seen on the weekly chart (not shown), where this week's trade has already engulfed the trading range from last week. This can be viewed as a bearish outside week with the weekly high above last week's high and this week's low below last week's low.

Support may be found at the contract's 20-day moving average at $.91505, while the 33% retracement of the March through May uptrend is found at $.91097 CAD/USD and may represent the next downside target.

Markets will be watching this Friday's Statistics Canada release of inflation data for April, with expectations that the consumer price index for Canada will be pegged at 2% in April, up from the 1.5% in March, which may be viewed as supportive for the dollar.

An interesting study on the Canadian dollar was released by Farm Credit Canada which suggests that there is actually a positive relationship between the Canadian dollar and Canadian net-farm income. This study questions conventional thinking that a weaker Canadian dollar is better for the industry. The argument was based on the notion that increased global demand for commodities places upward pressure on the Canadian dollar, which in turn translates into strong export demand and higher prices, with a higher net farm income being the end result.

DTN 360 Poll

This week's poll asks whether your operation has experienced delays in fertilizer deliveries this spring? You can weigh in with your thoughts and comments on DTN's Home Page, found in the lower right hand corner. We thank you for your participation!

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

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

© Copyright 2014 DTN/The Progressive Farmer. All rights reserved.