Canadian Dollar on Path to Parity, BofA Says: Technical Analysis

Canadian Dollar on Path to Parity, BofA Says
$C100 Canadian bank notes are arranged for a photograph in Toronto. Photographer: Norm Betts/Bloomberg

Canada’s dollar may appreciate to a two-month high if it closes above its 100-day moving average against the U.S. currency, according to Bank of America Corp.

A close stronger than that technical level would be its first since August and may spur the currency to parity, according to MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank of America. The loonie, as the Canadian currency is also known, last traded on a one-for-one basis with the greenback on Nov. 1.

“You’re seeing broad-based dollar weakness,” Curry said in a telephone interview from New York. “It’s targeting a move toward parity. You have a pretty decent rally transpiring in risk” assets.

Canada’s dollar appreciated 0.9 percent to C$1.0097 per U.S. dollar at 12:44 p.m. Toronto time. The loonie touched C$1.0077, its strongest level since Dec. 8. One Canadian dollar buys 99.04 U.S. cents.

The loonie’s 100-day moving average is C$1.0143, and a move to parity may prompt further appreciation to the 200-day moving average of 99.03 Canadian cents, Curry wrote in a research report today.

The Canadian dollar is getting a boost from overextended long positions in the U.S. dollar, or bets it will rally, according to Curry.

Futures traders increased net bets that the greenback will rise against the currencies of Japan, the euro zone, Australia, Switzerland, Canada, Britain, Mexico and New Zealand to 158,719 contracts last week, compared with a record high 166,591 reached in November.

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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