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Canadian dollar continues tough offensive against southern neighbor

Schedule Canadian dollar to US dollar at intervals of 1 week

The loonie stabilized against its stronger US counterpart on Friday as data showed gains in the Canadian economy, with the loonie holding near a three-year high and remaining on track for gains in April, the seasonally strong month for the loonie.

Canada’s economy grew 0.4% in February as retail trade rebounded after quarantine restrictions were partially eased, Statistics Canada said. The preliminary estimate of GDP in March showed an increase in the indicator by 0.9%.

The data supported a tougher stance from the Bank of Canada. The central bank made it clear last week that it could start raising rates next year and slowing down the pace of bond purchases.

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The price of oil, one of Canada’s top export commodities, has been under pressure from increased quarantines in India and Brazil, which are trying to curb the COVID-19 pandemic. U.S. oil prices fell 2.1% to $ 63.63 a barrel, while the U.S. dollar was on track to avoid a fourth straight weekly decline against a basket of major peers as analysts believe profit-taking short positions in it helped to raise the rate.

The yield on Canadian government bonds declined along the entire curve, while on 10-year bonds, it fell by almost one basis point to 1.557%. It hit its highest level in more than four weeks on Thursday at 1.611%. Canadian 2-year yield outperforms US equivalents by ~ 14.5 bps. compared to about 14.8 bp. at the previous session; the 10-year yield spread is ~ 7.8 bps. in favor of the dollar against 7.1 bp. in the previous session.

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USD / CAD Specifications:

Resistance:

  • 1.2535, April 22 high
  • 1.2468, 25 February low.

Support:

  • 1.2251, minimum January 31, 2018
  • 1.2218, trendline from June 10 low.

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