Canada Markets

Spot Canadian Dollar Chart Shows Exchange at a Crossroads

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The spot Canadian dollar failed to test the April high this month, while has retraced to the April lows after weakening 75 basis points on May 24/25. Today's close at $.7332 CAD/USD was below the 61.8% retracement of the move from the March low to April high at $.7331 CAD/USD. (DTN ProphetX chart)

Since reaching a November 11 high of $0.754922 CAD/USD, the spot Canadian dollar exchange rate with the USD has reached lower highs in the month of February, April and again in May. The April/May highs could be viewed as a double-top, while weakness on May 24/25 of 75 basis points has seen the current exchange drop back to its April low.

Today's close landed below the 61.8% retracement of the move from the March low to the April high, calculated at $0.733142 CAD/USD. Potential support may be found at the April low of $0.732595 CAD/USD, while a breach of this support could lead to a significant drop to the next level of chart support of $0.724774 CAD/USD on the daily chart, or a full retracement to the March low of $0.722365 CAD/USD.

As seen in the blue bars of the histogram on the first study, investors have held a bearish net-short position in Canadian dollar futures since late September 2022. The most recent data as of May 16 shows this group increasing this bearish position in two of the last three weeks.

At the same time, reports that the Canadian dollar tends to show seasonal strength from the month of February through to the month of July based on the past 20 years ending Dec. 31, 2022. The current year shows a counter-seasonal move in the Canadian dollar overall, with the monthly chart showing weakness against the USD in February and April along with the likelihood of further weakness in the current month.

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