Canada’s dollar is poised to test a technical level that marks the boundary between bullish and bearish outlooks for the currency versus its U.S. peer, according to Royal Bank of Canada, citing technical analysis.
The Canadian currency broke out of a six-week range June 20 after a report showed the nation’s consumer prices rose beyond the central bank’s target for the first time in more than two years, George Davis, chief technical analyst at the bank’s RBC Capital Markets unit, wrote in a client note. If it closes today stronger than C$1.0734, that will clear the way to advance to a trendline at C$1.0635, Davis wrote.
“This level is very, very important technically, as the trendline is drawn off of the lows dating back to September 2012,” Davis wrote. “A daily close below C$1.0635 would nullify our bullish view” on the U.S. dollar versus the loonie over the intermediate to long term.
The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 0.2 percent to C$1.0732 per greenback at 1:44 p.m. Toronto time. It closed at C$1.0758 on June 20, a the strongest since Jan. 6, after trading between C$1.0810 and C$1.0961 since May 8.
The nation’s consumer-price index increased 2.3 percent in May from a year earlier, a report showed June 20. The last time it exceeded the Bank of Canada’s 2 percent target was February 2012.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.