USD/CAD Open: 0.9802-05 Overnight Range: 0.9778-0.9860
The Canadian dollar was jumping around overnight. Helicopter Ben came to the rescue yesterday announcing the Fed won’t raise rates until mid-2013 and will use additional monetary policy tools as appropriate. It will be five years by mid 2013 that the Fed will have kept rates low. After the market absorbed the text, equity markets soared, oil gained, and so did the loonie. Overnight, China reported a better than expected trade surplus on strong export growth. The Bank of England reduced growth and inflation forecasts. The ECB continued bond buying. Oil is higher at $82.09 and gold is at $1,767. NY futures are pointing lower today. The IEA releases oil data today and the US releases weekly jobs data and wholesale inventories.
The short term Canadian dollar technicals are negative and it’s important to see if the late day Canadian dollar gains can hold. The long term Canadian dollar techinicals are bullish. For today, USD resistance is at 0.9850, 0.9914, 0.9950, 0.9974, and 0.9999. Support is at 0.9817 and 0.9750.
Certainty with respect to Fed low interest rates indicated that traders can continue borrowing in US dollars and piling in to equities and higher yielding currencies with certainty about US interest rates. 2013 is far away and many countries will likely need to raise rates in advance of that date, including Canada, boosting yield differentials. If and when the global economy picks up again, and if the FED holds true to keeping rates low, this could significantly weaken the US dollar during that time period. The market should remain volatile as long as confusing data exists about global growth. The focus shifts to containing the Eurozone debt issues and expectations of better growth data during the rest of the year. Equity prices, oil prices, and interest rate differentials should continue to drive the loonie’s direction. Many traders are wondering how bad the FED thinks the economy is considering they kept rates low until 2013, generally not bullish for oil prices.
Today’s Range: 0.9770 – 0.9950
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