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Soft Commodities Prices Erode Canadian Dollar
USD/CAD is trading in the mid-to-upper-1.35s after clocking an 11-year peak at 1.3622 Tuesday. A rebound in oil prices has taken upside impetus out of the pair, which still remains about 1.5% up on the week. Aside from oil price dynamics, another underpinning has been last Friday’s U.S. jobs report, which effectively greenlighted the Fed to hit the rate lift-off button on Dec-16. Additionally, the Canadian jobs report was weaker than expected, and despite a robust housing market, the Bank of Canada could be forced into cutting rates again.
Commodity weakness, and especially oil, continued to hammer the S&P/TSX individually, and stocks globally. Further erosion in Chinese traded data renewed investor concerns over growth and exacerbated the price slide. The commodity-heavy index again underperformed N. American shares, falling over 0.80%. CAD continued to suffer too, even after crumbling to better than 11 year lows on Tuesday.
The USD/CAD broke out to fresh 11-year highs on Tuesday and is consolidating on Wednesday ahead of the EIA inventory report which could alter the path of oil prices. Support on the currency pair is seen near further resistance at 1.3450, while resistance is now seen near 1.40. Momentum on the currency pair has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread). The index moved from negative to positive territory confirming the buy signal.
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