Canada Markets

The United States dollar strength, with the U.S. dollar index reaching a 20-year high, combined with crude oil weakness have teamed to weigh on the Canadian dollar.

The loonie closed lower for the fourth time in five sessions, with the spot dollar ending 27 basis points lower at $0.759509 CAD/USD. For the second time, the daily close was below the downward-sloping support line from a channel that has bound trade for just over one year. The July 14 trade also breached this support to reach a low of $0.759474 CAD/USD, while today's trade breached this support to reach a low of $0.758697 CAD/USD, the weakest trade seen since Nov. 2, 2020.

Today's low is testing support at the contract's 50% retracement of the move from the March 2020 low to the June 2021 high, calculated at $0.758601 CAD/USD. A breach of this level could lead to a continued move to $0.741274 CAD/USD, the 61.8% retracement of the same uptrend.

The lower study shows the noncommercial or speculative futures position as reported by the CFTC, which saw the bullish net-long futures position fall in the week ending Aug. 22 for the first time in six weeks and bears watching when Aug. 29 data is released on Friday.

Over the past five years, the spot Canadian dollar has gained an average of 19 basis points during the month of September, with gains seen in three of the five years. The loonie did average a 24-basis point loss in September during the past two years.

The Sept. 7 Bank of Canada rate announcement bears watching, with a 75-basis point hike expected, as found by a consensus of economists, although there is one view held that Canada's central bank will hit the pause button following the upcoming report.

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

Follow him on Twitter @Cliff Jamieson

(c) Copyright 2022 DTN, LLC. All rights reserved.