Canadian dollar set for further losses against the US dollar as the risk environment continues to deteriorate

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Published on Thursday, 28 June 2012 13:38

Written by Sam Coventry

"Equities and commodities are weak, volatility is slightly higher and the USD and JPY are strong" - Camilla Sutton at Scotiabank.

The Canadian dollar (Currency:CAD) has suffered through toady's trading - a strong performance witnessed during Asian trade was swiftly reversed as Eurozone issues were thrown into focus. (Latest FX forecasts are published at our IMT site, free access via this Facebook entry way).

The pound to Canadian dollar exchange rate is 0.29 pct up on Wednesday's closing level, GBP-CAD is at 1.6006.

The US dollar Canadian dollar exchange rate is 0.57 pct up at 1.0307.



The Australian dollar to Canadian dollar exchange rate is 0.12 pct higher at 1.0351.

The Canadian dollar has tracked equities, commodity prices and other risky assets lower. So what has spooked investors then?

The list is long - "disappointing German employment and deflation- ary pressures, combined with rumours that JP Morgan’s trading losses are $9bn, the looming EU summit, rising Italian bond yields and an absence of tier one fundamental data have markets shedding risk into today’s open. Accordingly, equities and commodities are weak, volatility is slightly higher and the USD and JPY are strong," says Camilla Sutton at Scotiabank.

According to Shaun Osborne at Scotiabank:

"CAD losses versus the USD have been fairly limited so far but the generally stronger USD/weaker commodity trend and broader risk aversion does suggest near-term upside risks in USD/CAD – towards the 1.03 area at least."

From a technical perspective Osborne says the charts remain bullishly aligned for the USD on a number of fronts.

"The June slide in USD/CAD looks to have been a consolidation ahead of another, powerful leg up in funds – to essentially replicate the May rally. From the 1.02 break out point, that suggests scope for a move to 1.0850. Intraday, we see support at 1.0200/30 and resistance at 1.0300/30," says Osborne.