Monday, June 1, 2015
The Canadian Dollar looks ready to fall below the .8000 level, continuing a pullback from a short run up in the currency. This pullback, starting in the middle of May, corresponds with the recent run up in the US Dollar, as well as the stabilization of crude oil prices. With no strong bullish trend in crude prices, the Canadian Dollar appears stuck in a rut as the Canadian economy absorbs the shock of the oil price collapse in 2014.
While the headline news was focusing on the US GDP negative growth rate, Canada also disappointed with a decline of .6% annualized for the first quarter of 2015. This was much lower than the expectations of a slight rise in Canadian GDP of .3% as well as being the first contraction since the 2009 recession. Most of this decline is attributable to the energy industry, as well as the harsh winter weather which affected Canada as well as the United States. The Bank of Canada last lowered interest rates in January of 2015 with a surprise rate cut from 1.0% to .75%. The lackluster GDP results will likely increase attention on the Bank of Canada to see if another rate cut might be forthcoming. Many traders will surely try to be prepared for the potential of another surprise announcement.
Turning to the 3 month continuation chart, we see a fairly strong bearish trend from the chart. The Canadian Dollar is trading under both the 20 day and 50 day simple moving averages. Traders will be keeping an eye to see if the 20 day simple moving average will cross under the 50 day simple moving average, another bearish signal. Bulls can take some comfort from the 14 day Relative Strength Index, which is still at 36.28, above the oversold level.
Dale Jennings, Commodity Analyst.