The Loonie, in a Run for Ransom
31.01.2020, 12:36

The Loonie, in a Run for Ransom

The Canadian Dollar lost more than 2% in January, legging it to its strong resistance border of 1.3230 to1.3270. There are several reasons that could contribute to such a harsh slide. The Canadian economy is struggling. The annualised GDP in the fourth-quarter of 2019 - which is yet to be released - is expected to replicate the year's third-quarter, which was at 0.3%, much less than 0.9%, where the GDP stood in the second-quarter of 2019. The unemployment rate in December 2019 remained high at 5.6%, slightly below the 5.9% level, which was recorded in November, but above the September and October figures of 5.5%.

The Loonie has suffered after the Bank of Canada (BoC) released its pessimistic statement regarding its economic outlook. The BoC's Governor, Stephen S. Poloz, admitted that uncertainty remains elevated within the Canadian economy itself, adding that "we also received a string of disappointing readings related to the Canadian consumer. Vehicle sales, retail sales more generally, consumer confidence and job growth all softened". The fall in oil prices - a major Canadian export -, may have geared the Loonie to decline further. WTI crude plunged from $65 per barrel at the begging of January to $52 by the end of the month, perhaps due to fears of a sluggish demand for oil amid the virus outbreak in China. However, oil prices have halted recently after the World Health Organisation (WHO) praised the efforts of officials in Beijing for tackling the decease. The WHO recommended that no restrictions on travel and trade are needed, although, the organisation declared that the coronavirus constitutes a public health emergency of international concern.

The Organisation of the Petroleum Exporting Countries (OPEC) said it could hold a meeting in February ahead of the one scheduled for March, due to the sharp drop in oil prices. Amid global uncertainty, WTI crude futures are resting above their support levels of $51.6 per barrel, an October 2019 low.

Technically speaking, USD/CAD has run up to its resistance border. There may be a decent possibility this border might hold the Loonie and redirected USD/CAD towards its main downtrend. The closest targets for the Canadian Dollar in this case may be at 1.3100 to1.3150 against the US Dollar. Alternatively, if the USD/CAD continues to climb, breaking through the resistance, the technical picture suggests that the USD/CAD may rise to 1.3300.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Indiscriminate reliance on illustrative or informational materials may lead to losses
.

© 2000-2020. All rights reserved.

This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Feedback
Live Chat E-mail
Up
Choose your language / location