The Canadian dollar is poised to test a 4 1/2-year low in a reversal of the rally that brought it to its highest level in a month, according to Royal Bank of Canada, citing technical factors.
If the loonie ends today weaker than yesterday’s closing of C$1.0953 per U.S. dollar, it would form a “bullish key reversal day” that signals the end of the currency’s recent run of strength, George Davis, chief technical analyst at RBC Capital Markets, wrote in a note to clients. The next key level is C$1.1033.
“A daily close above this level would amplify the oversold nature of the daily studies, exposing the high at $C1.1223 once again,” Davis wrote, citing the level reached Jan. 31 that was the weakest since July 2009. “A close above yesterday’s high at C$1.0976 would be an even more powerful signal.”
The loonie, as the currency is known for the image of the aquatic bird on the C$1 coin, depreciated 0.8 percent to C$1.1037 per U.S. dollar at 11:20 a.m. in Toronto. It earlier advanced to C$1.0911, the strongest level since Jan. 16. One loonie buys 90.60 U.S. cents.
Canada’s currency has strengthened 0.7 percent this month versus the greenback after dropping 4.5 percent in January, its biggest loss for the first month of the year in at least 42 years.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
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