The Canadian dollar will test its weakest level since May 2010 against the U.S. dollar and may reach the least since 2009 as it maintains a long-term decline, according to Royal Bank of Canada
The currency’s close yesterday at C$1.0766 per U.S. dollar breached a key resistance level at C$1.0738, George Davis, chief technical analyst for foreign exchange, and strategist Paul Borean at the company’s RBC Capital Markets unit in Toronto said in a client note today. A closing above C$1.0853, its 2010 high, would open the way for the currency to slide toward C$1.0991, they wrote. That’s the weakest level since September 2009.
Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, dropped yesterday after the nation’s November trade deficit swelled to nine times what economists forecast, adding to bets Bank of Canada Governor Stephen Poloz might cut interest rates.
“Weak domestic data flow prompted the initial leg higher during yesterday’s session, and BoC Governor Poloz commented in an interview after the close that he is not under pressure to raise the policy rate,” Davis and Borean wrote. “We retain our core bullish view on dollar-Canada, with pullbacks to C$1.0679 expected to attract medium-term buying interest.”
The loonie depreciated as much as 0.6 percent today to C$1.0829, the weakest level since May 2010, before trading at C$1.0805 in Toronto, down 0.4 percent.
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 clustered.