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Bank of Canada Concerned About Rise in Canadian Dollar
Firmness in the metals complex and the strong uptrend in crude oil helped pressure the USD CAD on Thursday. Despite the strong influence from outside markets, comments from Bank of Canada Governor Mark Carney kept a floor on losses.
His primary concern is with the sharp rise in the Canadian Dollar over the past three months. The BoC is beginning to become concerned that the currency's rapid appreciation would "fully offset" any gains the Canadian economy has been experiencing.
Since the Canadian economy relies so heavily on exports, a strong Canadian Dollar may cause buyers to shy away from Canadian goods and seek cheaper prices elsewhere. This would affect the trade surplus, and hurt the economy's chances of pulling out of the current slowdown.
Looking at the charts, last week's closing price reversal bottom in the USD CAD remains intact and the possibility of a rally still exists as long as this market can hold the retracement zone at 1.1039 to 1.0980.
This zone represents the key retracement zone of the 1.0783 to 1.1290 range.
A failure to hold this zone as support should trigger a retest of the Main Bottom at 1.0783. If this market can gain support in this zone then look for the market to challenge the Main Top at 1.1290. A breakout through this level will turn the Main Trend to up for the first time since April 13.
Tags:canadian-dollar
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