Canada Markets

Canadian Dollar Reaches Fresh 2024 Low

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The spot Canadian dollar has breached retracement support at $0.734674 CAD/USD for the second time in a week, reaching its weakest trade since Nov. 24. Nearby chart support may lie above $0.7398, or a chart gap seen in late November. The lower study shows the noncommercial net-short position in CAD futures growing larger over six consecutive weeks. (DTN ProphetX chart)

The spot Canadian dollar closed 59 basis points lower at $0.730326 CAD/USD, which is also the low for the session while the weakest trade since Nov. 22.

Today's reports included the Bank of Canada's decision to hold its key rate steady for a sixth consecutive report at 5%, while this news was countered by higher-than-expected consumer price data in the United States which resulted in a bullish move for the U.S. dollar index and against the Canadian dollar.

As seen on the attached chart, the spot Canadian dollar exchange with the USD broke below support for the second time in four sessions to reach a low of $0.730326 CAD/USD. This support is calculated at $0.734674 CAD/USD (horizontal pink line), which is calculated by the 61.8% retracement of the move from the Oct. 31 low to the Dec. 28 high. Today's move marks the largest one-day move lower since Feb. 13, or close to two months.

Today's move is seen testing potential support of a gap in trade shown from Nov. 22 to Nov. 24, which coincides with Thanksgiving in the U.S. The lower end of this gap is seen at $0.729799 CAD/USD, while this exchange would first have to push below psychological support at $0.73. A breach of this support may result in a continued move to $0.722616 CAD/USD, a weekly low reached in November.

The blue histogram bars on the lower study shows investors increasing their bearish net-short futures position in the Canadian dollar for six consecutive weeks as of April 2, now holding the largest bearish position since the week ending Dec. 19 at 51,223 contracts net-short.

It is interesting to note that reports the month of April as the strongest month of the year for the Canadian dollar, gaining an average of 1% for the month over the past 20 years, with a gain frequency of 65%. During this period, the largest loss for the month is reported at 4.6%, while the spot dollar has weakened 1.1% so far this month.

Today's Bank of Canada decision to leave their key rate unchanged at 5% for a sixth consecutive decision may seem like a supportive feature for the loonie, although higher-than-expected inflation in the U.S. for March resulted in U.S. dollar strength that muted Canada's central bank decision.

The Bank of Canada hints that a June rate cut remains in the "realm of possibilities," although economists seem divided over when this first-rate cut will be announced. BNN Bloomberg is quoting an unnamed portfolio manager that feels the loonie could fall to a low of 50 cents against the USD if the country does not address issues linked to inflation and affordability across the country.

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