The Canadian dollar is weak to start the 2015 trading year. It has fallen nearly a cent since the Asia opening on the back of broad-based US dollar buying against the majors. Last year’s closing theme of higher US interest rates and Quantitative easing programs in Japan and the Eurozone carried forward into the New Year, stoked by European Central Bank (ECB) president, Mario Draghi’s comments published in Handelsblatt. Mr. Draghi reiterated plans for a US style quantitative easing program in early 2015 and although they weren’t anything that he hadn’t said before, traders sold EURUSD and bought dollars against everything else.
The Canadian dollar is being undermined by sentiment that oil prices will continue to head lower, general commodity indices weakness and a lack of domestic data to provide direction. The data issue will be resolved next week with the release of Industrial Production, Merchandise Trade, Housing Starts and the employment report. This data could support the Canadian dollar if it shows that the US economic recovery is spilling into Canada.
The fact that many traders are still on holiday combined with the magnitude of the overnight move suggests that USDCAD could retrace some of today’s gains as traders book some profits.
The short term USDCAD outlook is bullish while trading above 1.1660 with the break of resistance in the 1.1680 level pointing to further gains to 1.1730. A move back below 1.1670 points to further losses to 1.1620 on the day.
Longer term, USDCAD is in an uptrend since September while trading above 1.1440 targeting a test of 1.1820 which was last seen in May 2009.
Forecast Trading Range for the Day 1.1670-1.1720
Chart USDCAD 1 hour