Canada Markets

Canadian Dollar Trades Sideways

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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After reaching a high of $.7979 CAD/USD on April 17, the spot Canadian dollar exchange with the USD has fallen to hold above $.7749 CAD/USD, which is the 67% retracement of the move from the March low to April high. Over the past 10 sessions, the dollar has remained in a narrow 51 basis point range in sideways trade. The blue bars of the histogram (middle study) shows investors or noncommercial traders holding a bearish net-short position for six weeks. (DTN ProphetX Chart)

We last looked at the Canadian dollar on April 17, when the Canadian dollar reached its highest level in nine weeks relative to the United States currency, while at that time was testing the 67% retracement of the move from the contract's January high to March low at $.79803 CAD/USD. At this time, technical analysis rules would suggest that a breach of this resistance could have resulted in a further move to test January highs at $.8150 CAD/USD.

This breach of resistance never took place, while the exchange rate fell in five of the six following sessions to shed 183 basis points. Since April 24, trade has moved sideways, fluctuating over a narrow 51 basis point range for 10 sessions in total.

Trade remains above $.77492 CAD/USD, the 67% retracement of the move from the March low to April high. Given the measuring implications for trade within a channel, a breakout to the upside could suggest the next target at $.7852 CAD/USD, while a breakout to the downside would suggest a target of $.7698 CAD/USD, or plus or minus 51 basis points from the upper and lower levels of the channel.

The middle study points to the net-short position held by noncommercial traders or speculators, now in the sixth consecutive week. While the position has been relatively stable, this is the longest stretch of net-short positions held since the March through July period in 2017 (17 consecutive weeks), while interestingly, began within one week of start of this bearish period in 2017.

External factors this week include the surge in crude oil futures, which remains a supportive factor, along with movements in the USD. The growing angst over the potential for a NAFTA agreement remains an ongoing concern for dollar traders, who will also be watching for Friday's Statistics Canada jobs report for April.

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

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