Canada’s Dollar Set to Drop to 4-Month Low, RBC Says

The Canadian dollar is poised to weaken to an almost four-month low versus its U.S. peer as Ukraine turmoil weighs on risk appetite, according to Royal Bank of Canada, citing trading patterns.

The currency’s close at a three-month low yesterday has “morphed in to a full-blown trend change,” with C$1.0999 and C$1.1052 serving as the next resistance levels, George Davis, chief technical analyst at RBC Capital Markets in Toronto, wrote today in a note. The loonie, as the currency is known for the image of the waterfowl on the C$1 coin, had strengthened 3.6 percent in the second quarter, second most among the greenback’s 16 major peers. It last weakened to C$1.1052 on April 23.

“A further deterioration in the risk backdrop has sustained broad-based USD strength,” Davis wrote. “Yesterday’s close above C$1.0958 has confirmed a full-blown trend change.”

The loonie fell yesterday to its weakest level since May 5 after crude oil, the nation’s biggest export, and stocks declined amid a flareup of tension in Ukraine, where Russian troops were massing on the border.

Canada’s currency appreciated 0.3 percent to C$1.0925 today in Toronto trading after a report showed Canada’s merchandise trade surplus in June was C$1.86 billion ($1.69 billion), the most since December 2011, Statistics Canada said. Economists forecast the trade account would be balanced, according to the median of 17 forecasts in a Bloomberg survey.

“We were looking for a bit of a pullback today, which the data corroborates,” Davis said via e-mail, referring to the U.S. dollar. “But would use pullbacks as a buying opportunity based on the recent bullish trend reversal in U.S. dollar/Canadian dollar,”

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index. Resistance is a level on charts where orders to buy or sell a security may be clustered.

To contact the reporter on this story: Akin Oyedele in New York at

To contact the editors responsible for this story: Dave Liedtka at Kenneth Pringle

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.