CAD USD 21 Jan 2010

Even as the US dollar continues to strengthen against the euro it is not enjoying the same success against the Canadian dollar where it is currently struggling at the USD1.0510 price handle despite the price action having broken through the 9,14 & 40 day moving averages.  One possible reason is the recent diversification by various central banks, most notably Russia whose  first deputy chairman of its central bank, Alexei Ulyukayev, confirmed that it would be investing in Canadian dollar denominated deposits and bonds.  “The Canadian financial market is not very deep, so we can invest in deposits in significant volumes, while the bond market is limited,” he said.  Whilst the central bank did not specify how much of its reserves it was allocating to the Loonie,  analysts estimate that the central bank could put up to $9bn, or 2 per cent, of its foreign exchange reserves into the currency.  Russia’s foreign exchange reserves stood at $439bn at the end of Dec 2009 having grown 14% since March as rising commodity prices boosted Russia’s coffers.

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Support & Resistance for USDCAD (Daily Chart)

S1:  1.0346   R1:  1.0523

S2:  1.0240   R2:  1.0594

S3:  1.0169    R3:  1.0700

Other items of fundamental news likely to affect the Canadian Dollar

Can Dollar to US Dollar 8 Dec 2009

The shooting star candle on the usd to cad chart may yet be validated later today as the currency market waits for the Bank of Canada interest rate decision later.  Consensus of opinion seems to be for a hold at 0.25% but given yesterday excellent building permits data which came in at a stellar 18.0% against a forecast of a mere 1.1% the Bank’s statement will be scrutinzed even more closely.  Just prior to release of the interest rate decision the market will have had the Housing Starts data which is expected to come in at 159k – marginally better than the previous 157k.  However, should this too overshoot together with a hawkish tone from the BOC could see the US dollar continue its downwards slide against the Loonie and with Bernanke signalling yesterday no change to an “extended period” of low interest rates this afternoon’s activity should provide us with some excellent trading opportunities in this pair.

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