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Dollar-Loonie Average Break May Spur Gain: Tech Analysis

Oct. 23 (Bloomberg) -- The U.S. dollar may extend gains against its Canadian counterpart should it breach its 200-day moving average, according to Royal Bank of Canada.

The greenback began a “corrective phase” in September, George Davis, RBC’s Toronto-based chief technical analyst for fixed income and currency strategy, wrote in a note to clients yesterday. The U.S. currency climbed from a low of 96.33 Canadian cents on Sept. 14 to as high as 99.65 cents yesterday, according to data compiled by Bloomberg. The 200-day moving average stands at 99.99, according to RBC.

“A daily close above this level is required to trigger a bullish trend reversal that would indicate that an important shift in sentiment is underway,” Davis wrote, referring to the U.S. dollar’s 200-day average.

The greenback bought 99.24 Canadian cents as of 8:21 a.m. in Tokyo from 99.22 yesterday, when it reached 99.65, the strongest since Aug. 10. The Canadian dollar is nicknamed the loonie for the image of an aquatic bird on the C$1 coin.

The U.S. dollar’s moving average convergence/divergence was at 0.0019, while its signal line was at 0.0002, Bloomberg data show. That’s the widest gap since Oct. 3, indicating the U.S. currency may advance.

MACD is a gauge of momentum and is calculated by subtracting the 26-day exponential moving average from the 12 day average. The signal line is a nine-day exponential moving average of the MACD, and provides buy and sell signals.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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