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Week Trade Data Erodes Canadian Dollar

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Week Trade Data Erodes Canadian Dollar

The Canadian dollar lost ground on Friday despite strong crude oil prices, after Canadian Statistics released a worse than expected trade deficit report. The technical picture points to a weaker Canadian dollar versus the greenback, as market participants test upside resistance levels.

The decline in the Loonie comes despite strong crude oil prices which are generally correlated to the movements of the Canadian dollar. On Wednesday evening the API released its inventory report which showed a surprise decline in inventories which kept petroleum markets unchanged. The American Petroleum Institute late Wednesday reported a decline of 473,000 barrels in crude supplies for the week ended February 14, 2014. The fall was unexpected as analysts surveyed had forecast a climb of 1.9 million barrels in crude supplies. The API reported gasoline stockpiles rose 1.4 million barrels, while distillate supplies fell 676,000 barrels. Analysts were looking for gasoline supplies to decline 1.3 million barrels and distillate inventories to fall by 2 million barrels.

In economic data released on Wednesday, Canadian wholesale trade fell by more than expected in December, down by 1.4% to the lowest level in six months, according to Statistics Canada. Analysts had expected a decline of 0.5 percent.

The soft number pushed yields lower. Canada’s two-year bond yield was lower Thursday at 0.98% compared to Wednesday closing level of 1.00%, while the 10-year bond was yielding 2.53%, down 3 basis points from 2.56%.

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The USDCAD continues to surge and test the January highs near 1.12. Support is seen near the 10-day moving average near 1.1025. Momentum is strong as the MACD (moving average convergence divergence) index is generating a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The RSI moved higher with price action and is printing near 68, which is the upper end of the neutral range.

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