Canada Markets

The Canadian dollar showed volatility in early week trade, moving over a 52-basis point range on Monday while closing 24 basis points lower at $0.7242 CAD/USD. Monday's low of $0.7231 CAD/USD reached its weakest trade against the USD since the week of May 26, 2020, or over two years.

Potential support on the weekly chart is seen at $.7206 CAD/USD, which is the lower end of a gap in trade on the weekly chart formed in the move from the week of May 18, 2020, to the week of May 26, 2020. The $.72 CAD/USD level may act to support this exchange, while the 78.6% retracement of the long-term move from the March 2020 low to the June 2021 high is found at $.7166 CAD/USD (horizontal green line), which may act to provide a further slide to the 2020 low.

As seen in the first study, the blue histogram bars show noncommercial traders or investors increasing their bearish net-short position in Canadian dollar futures by 3,741 contracts in the week ending Oct 4, with the bearish net-short position of 21,407 contracts the largest seen in two years.

According to equityclock.com's 20-year seasonal chart, the Canadian dollar tends to reach a seasonal high in October with weakness seen over the balance of the year. According to their monthly average calculations over this period, the October trade averages 0.1% lower, the second of three months of the year that result in a bearish decline in the country's currency. This also includes a 0.5% drop in the month of January on average and a 0.6% drop in the month of November.

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

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