Forex Outlook: CAD Slightly Up Amid Cautious Trading

on Nov 14, 2012

**CAD Gains Ground After Yesterday’s Dip**

The Canadian dollar (CAD) closed lower on Tuesday as traders digested news that the federal budget will not be balanced until 2016-17, a year later than previously forecast. The loonie was off 0.06 of a cent at US$99.81 as Canada’s Finance Minister Jim Flaherty also delivered a fiscal update that said the federal deficit will rise by about $5 billion to $26 billion this year.

Today, the Canadian dollar is posting a better performance, currently trading at 1.000 USD, with no expectations of a significant lift during the day, with no major economic or financial announcements expected in Canada that would have particular influence. However, in regards to the Canadian currency, the price of crude oil, the country’s most exported product whose price is in tight relation to the CAD movements, has settled in the region of US$84.34, or down -0.05 per cent.

**Greek and US Pressure**
Recently, the loonie has been under pressure as traders are cautious amid wrangling over more bailout money for Greece and worries regarding the approaching “fiscal cliff” in the United States. According to Mark Chandler, head of Canadian fixed income and currency strategy of Royal Bank of Canada, risk appetite has been unstable “with mostly weaker risk appetite prevailing as it relates to confusion about the next payment for Greece.”

The most commonly traded currency pair relative to the Canadian dollar, USD/CAD continues to press against the 38.2 per cent retracement of the decline from the October 2011 high. The pair has recently bounced off of its session lows, as it recovers the mark of parity.
As reported by FXstreet, quoting analyst at FX Instructor, Mark De La Paz, “The USD/CAD has a bias for the sell-side. Hourly charts also have a bearish engulfing confirming market direction though proximity to a moderate support at 0.9996, which suggests we should wait for a close below it before jumping short.”

Amongst other currency pairs with CAD’s presence, currently at fresh 3-month high area 1.0464, “AUD/CAD retains a bullish bias,” according to Toronto FX Research Team at TD Securities. “The move up looks stretched (implying the risk of choppier gains),” the analysts say, “but there is no sign of a top or reversal and the near-term trend looks positive. We have to expect a retest of the 1.06 high, at least, from here now,” the team noted.


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