Oct. 23 (Bloomberg) -- The Canadian dollar may appreciate to the highest level in more than a month against its U.S. counterpart after passing through key levels of resistance, according to JPMorgan Chase & Co., citing technical indicators.
Canada’s currency firmed beyond a resistance zone from 99.50 cents to C$1 per U.S. dollar and now faces the crucial level of 98.80, Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote today in a note to clients. A break through 98.80 could push the Canadian dollar to 97.33, its strongest level since Sept. 21, he said. JPMorgan forecasts that the Canadian dollar will appreciate to 98 cents by the end of the year, according to a Bloomberg survey.
“If we start seeing follow-through weakness for dollar-CAD below 98.80, that’s important because it would suggest further downside,” O’Connor said in a telephone interview. “It would validate that breakout pattern.”
The currency, dubbed the loonie for the image of the waterfowl on the C$1 coin, was little changed at 99.28 cents per U.S. dollar at 1:41 p.m. in New York. The loonie earlier weakened as much as 0.5 percent. One Canadian dollar buys $1.0073.
The loonie erased an earlier loss versus its U.S. counterpart after the Bank of Canada unexpectedly strengthened its bias for raising interest rates, keeping its outlier status among the Group of Seven nations.
“Following the announcement this morning and the fact that the Canadian dollar is overperforming right now after being a terrible performer over the last few weeks, it’s probably due for some retracement,” O’Connor said.
The Canadian dollar had fallen 3 percent through yesterday’s close after reaching a 14-month high of 96.33 on Sept. 14.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be gathered. Support is an area where there may be buy orders.
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