Canada Markets

Spot Canadian Dollar Dips Below Support

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The spot Canadian dollar moved below support at $.76045 CAD/USD on Wednesday, which represents the 50% retracement of the move from the June low to the August high, while dipping below $.76 to reach its lowest level in 16 sessions. The middle study shows investors paring their bearish net-short futures position as of Aug. 7 data, the fourth consecutive reduction in this bearish positon. (DTN ProphetX chart)

The spot Canadian dollar reached a 15-day low on Wednesday against the U.S. dollar, dipping below $.76 for the first time seen since July 24, although pared losses to end at $.76111 CAD/USD, down 33 basis points. Since the Aug. 7 high of $.7711 CAD/USD, the loonie has fallen 1 cent or 1.3%.

Wednesday's move broke through support at $.76045 CAD/USD, which represents the 50% retracement of the move from the June low to the August high, after testing this level for the third time in four sessions, although today's move saw a recovery to end above this level. A sustained move below this support could lead to a further move to a test of $.75793 CAD/USD, the 61.8% retracement of this same uptrend. Further support lies at the upward sloping trendline drawn from the June 22 low, with support currently pegged at $.75686 CAD/USD.

The blue bars of the histogram in the first study shows investors or noncommercial traders paring their bearish net-short futures position for the fourth consecutive week to 24,898 contracts as of Aug. 7, down 53% from the 52,887 contracts held as of July 10. Late-week weakness, seen last week, points to the possibility that this short-term trend may be broken when Aug. 14 data is released on Friday.

While not shown, the Canadian dollar's seasonal trend is also a bearish factor that can weigh on this exchange rate. The five-year seasonal average (2013 to 2017) calculated on ProphetX points to a seasonal high reached in September with a downward trend in the exchange seen into December. This is confirmed by equityclock.com that shows a seasonal downtrend in the Canada-U.S. exchange rate from mid-September through mid-December based on 20-year averages ending Dec. 31, 2017.

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

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