Looming risk for Canadian dollar is Friday's US non-farm and Canada employment releases

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Published on Wednesday, 04 July 2012 14:58

Written by Will Peters

International Money Transfers at our sister site

The Canadian dollar (Currency:CAD) remains flat as poor volumes and anticipation for tomorrow's currency-driving events keep traders cautious.

The pound Canadian dollar exchange rate is 0.47 pct down on Tuesday's close at 1.5809. The US dollar to Canadian dollar exchange rate is unchanged at 1.0133.

The Canadian currency is essentially flat against the US dollar in mid-afternoon European trade, that said, CAD has gained 2.1% since Friday’s weakest point.



According to Camilla Sutton at Scotiabank, the rally in CAD has been on the back of:

"1) reassurance from Europe, which has helped to soothe risk aversion;

"2) stronger than expected official PMIs from China, which is encouraging for those who expect a soft landing from China (ourselves) and commodity prices;

"3) oil prices, which have moved higher on the back of supply issues, and are important for the Canadian economy and

"4) an ongoing commitment from central banks that they will do what is necessary for the stability of the financial system."

So what risks lie ahead?

For the markets in general direction tomorrow will be out of Europe where the Bank of England and the European Central Bank are due to announce action.

But for the Canadian dollar itself, the looming risk, "is Friday’s nonfarm and Canadian employment releases; however CAD appears poised to move back towards parity. We have made no change to our forecast of a strengthening CAD, which closes the year at 1.01 (or in USDCAD terms 0.99)."

On the technical front, the US dollar / Canadian dollar exchange rate closed on a relatively soft note yesterday, right on the 200-day MA.

"Corporate and commercial Canada appears content to soak up cheaper USDs in the low 1.01 area for the moment, providing some underpinning for the market. However, the general tone here remains soft after last week’s rejection of the 1.03 area and a clear push under 1.01 support could still see funds slip another couple of big figures quite easily," says Shaun Osborne at TD Securities.