Canada Markets

The Canadian Dollar Enters a Period of Seasonal Weakness

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Historical charts for the spot Canadian dollar points to weakness over the month of October (blue bars) in four of the past five years and seven of the last 10 years. Over this period, the fourth quarter (October-December, brown bars) has realized weakness in seven of the past 10 years and not since 2011. (DTN chart by Cliff Jamieson)

The spot Canadian dollar (CAD) closed 57 basis points lower against the United States dollar on Wednesday to end at $0.7510 CAD/USD, while reaching a three-week low. Wednesday's move saw the loonie finish below its 200-day moving average for the first time since Sept. 3, while it is nearing a test of potential support from a bullish gap in trade seen from Sept. 3-4 trade.

A five-year seasonal index chart created on ProphetX shows the seasonal average of the spot Canadian dollar moving from a September high of $0.8063 CAD/USD to a December low $0.7678 CAD/USD, a 4.8% decline. Equityclock.com charts a 20-year seasonal trend that shows an approximate move from a seasonal high in September at 2.2% above the seasonal average to a low in December at roughly 0.25% above the season average.

The blue bars on the attached chart shows that the Canadian dollar has weakened against the U.S. dollar in six of the past seven years and seven of the past 10 years. The downward move has averaged 97 basis points over the past five years and 30 basis points over the past 10 years.

The gold bars on the attached chart shows that the Canadian dollar has weakened against the U.S. dollar in the final quarter of the year (Oct/Nov/Dec) in each of the past seven years, while in seven of the past 10 years. The Canadian dollar strengthened against the U.S. dollar in the last quarter of 2009, 2010 and 2011. On average over the past five years, the Canadian dollar weakened 242 basis points in the last three months of the year, while on average over 10 years, weakened 86 basis points.

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

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