The Loonie had a lousy day in yesterday’s trading session and it continues to weaken this morning. Yesterday, Statistics Canada said the trade deficit approached $4.2 billion in January in comparison with a record deficit of $4.8 billion in December. However, the deficit was more extensive than expected with the read at C$3.5 billion.
The USD/CAD pair closed 0.19 percent higher, but at one moment during yesterday’s trading session, it increased 0.46 percent (weaker Loonie). Without more economic data, the reasons for the Loonie’s weakness included crude oil price performance, a stronger US dollar, and the risk off environment in global markets. Regarding crude oil, the latest news is a tweet from Trump asking the OPEC to, “…increase the flow of oil.” Trump said that oil prices have risen too high and called on the OPEC to do its part to alleviate the price increase. The price of crude oil fell immediately after his tweet.
More locally, Canadian bonds also showed an inverted yield over the last few days after US Treasury bonds showed the same pattern on Friday. This has spooked market participants, and the Loonie has suffered the consequences. Market participants perceive that the BoC is already in a dovish mode and could follow the Fed to freeze rates for the rest of the year.
Technically speaking, the USD/CAD pair is trading at 1.3428, a few pips away from the resistance of 1.3340. As mentioned yesterday, the USD/CAD rate seems stuck from last Thursday between the 1.3340 and 1.3443 levels. Other resistance and support levels to watch once the USD/CAD picks a direction are the March 7th top at 1.3467 and the significant support at around the 1.3300 handle.