Canada Markets

Canadian Dollar Rally Stalls

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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After reaching a low on Sept. 7, the Canadian dollar has moved sharply higher to levels close to the 50% retracement of the downtrend from the July high to September low at $0.7467 CAD/USD. Sept. 20 trade also stalled at the resistance of the contract's 50-day and 100-day moving averages. The histogram bars in the lower study shows investors increasing their bearish net-short position for five consecutive weeks. (DTN ProphetX chart)

The spot Canadian dollar has closed higher in seven of the past nine sessions, with the Sept. 20 gain of 3 basis points the smallest seen over the rally following the release of Federal Reserve minutes today. Today's $0.7441 CAD/USD close is the highest seen since Aug. 11 or over one month, while there is reason to believe that the loonie's move has run its course.

During the past two sessions, highs reached remain under retracement support at $0.7467 CAD/USD, which represents the 50% retracement of the move from the July 13 high to the Sept. 7 low. The move saw the spot dollar form a bullish gap higher in three of the recent nine sessions, while the Sept. 19 gap formed saw the exchange rate push through the 200-day moving average.

In addition to retracement resistance, daily highs during the past two sessions stalled at the 50-day moving average (red line) and the 100-day moving average (green line). While closing 3 basis points higher on Sept. 20, the close was at the lower end of the session's range while trade consolidated within the range traded in Tuesday's session as traders pause to reflect on the recent move.

The histogram bars on the lower study shows investors holding a bearish net-short position in the Canadian dollar of 41,883 contracts as of Sept. 12, growing larger for five consecutive weeks and the latest net-short seen since late May, or 16 weeks.

The recent rally in crude oil has been a supportive factor for the Canadian dollar, although today's Federal Reserve signals of another expected rate hike in 2023 had a bearish effect on crude oil late session. Canada's central bank could soon be caught in the dilemma of needing to raise rates to follow the U.S. lead, while facing an affordability crisis across the country that will lead to angry voters. On Tuesday, Statistics Canada reported the Consumer Price Index at 4%, above the increase expected by some prominent economists, while two times the 2% target set by the Bank of Canada.

Cliff Jamieson can be reached at

Follow him on X, formerly known as Twitter, @Cliff Jamieson

Cliff Jamieson can be reached at

Follow him on X, formerly known as Twitter, @Cliff Jamieson


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