Loonie Closes 2019 at a New High, More to Come in 2020?
Matt Weller, CFA, CMT December 31, 2019 10:20 AM
Today’s breakdown, if sustained, could have much further to run as traders flip their calendars to 2020.
As we noted yesterday, this time of year is notorious for low-liquidity trading, and more often than not, lackluster markets as traders plan their New Year’s celebrations.
One currency that’s bucking that trend is the Canadian dollar, which is ringing 2020 in style. Shrugging off today’s weakness in oil prices, the loonie just hit a 14-month high against its rival to the south (this is shown as a 14-month low in the USD/CAD exchange rate).
Source: TradingView, GAIN Capital
While a bit of month- and quarter-end selling in the greenback is playing a role, the Canadian dollar is nonetheless the second strongest major currency on the day behind the pound sterling. From a fundamental perspective, the Canadian economy is poised to benefit from a potential reacceleration in global growth in 2020 driven by a truce in the US-China trade war, as well as the Bank of Canada’s relatively “high” interest rate of 1.75% (although the central bank may be considering a cut at some point next year).
Technically speaking, USD/CAD is in the midst of breakdown below previous support in the 1.3020-40 band. Beyond the potentially minor 78.6% Fibonacci retracement of the Q4 2018 rally at 1.2970, there’s little in the way of logical support levels until the October 2018 low near 1.2800. In other words, today’s breakdown, if sustained, could have much further to run as traders flip their calendars to 2020.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.