Canadian Dollar Retraces from 12-year highs

USD/CAD has shed about 1.5% since Monday’s 1.3435 peak in logging a five-day low today at 1.3280. The rebound in oil prices, which has taken front-month NYMEX crude futures up from the low $40s to above $43, has underpinned the Canadian dollar, while the U.S. dollar has also come under general pressure. USD/CAD’s 12-year at 1.3457 has now slipped back below the horizon. Key supports are at 1.3250, which encompasses the 20-day moving average and the Nov-19 low. Resistance on the currency pair is seen near the September-28 high of 1.3457. Momentum remains positive but the trajectory has flattened pointing to consolidating.

Canada’s economy resumed growth in Q3 after GDP posted back to back declines in Q1 and Q2 amid the sharp drop in oil prices. The economy managed to adjust to lower oil and other commodity prices with the help of two rate cuts from the Bank of Canada, allowing net growth to return by mid-year. Of course, adjustment is ongoing and there is still quite a way to go before Canada’s economy resumes self-sustaining growth. The expected 2.3% gain in Q3 GDP will leave an economy that is moving in the direction anticipated by Bank of Canada.

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