Canada Dollar to Test 5-Year Low on C$1.10 Break: RBC

The Canadian dollar declined to the lowest level in three months versus its U.S. peer and almost reached a technical level that may drive it toward the weakest since 2009, according to Royal Bank of Canada.

A daily close above C$1.10 will extend the Canadian currency’s decline potentially to C$1.1122, around the 76.4 percent Fibonacci retracement from an almost five-year low touched in March, George Davis, chief technical analyst at RBC Capital Markets in Toronto, wrote in a research report today.

“We look for a sneaky USD bid to result in another challenge of the C$1.1000 area toward the back end of the week,” Davis wrote.

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell to as low as C$1.0998 per U.S. dollar, the weakest since May 2, before rising 0.3 percent to $1.0952 as of 5 p.m. in Toronto. It last touched C$1.1122 on March 26, six days after reaching C$1.1279, the least since July 2009.

The currency fell last week as Bank of Canada Governor Stephen Poloz said that persistent slack in the country’s labor market and a tendency toward part-time job creation means the central bank has the scope to keep its main interest rate at 1 percent, near historic lows, even if employment picks up.

The U.S. Federal Reserve has kept its benchmark rate at a record-low zero to 0.25 percent since December 2008, with futures traders seeing about a 54 percent chance the central bank will start raising rates by July, according to data compiled by Bloomberg.

Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, known as Fibonacci, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.

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