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Loonie Gains Traction in Solid Chinese Data

David Becker
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USD/CAD logged a fresh six-month low at 1.0625 on Wednesday, the sixth consecutive lower low on the daily chart. The pair breached below the 200-day moving average at 1.0783 early last week and has been trending lower since. The move reflects a broad dollar-bloc bid that was initially sparked by much stronger than expected PMI data out of China and Japan, which has underpinned the commodity-correlating currencies as investors adjust a more optimistic world outlook.

The Bank of Canada is also under pressure to reconsider its dovish policy stance. Resistance on the currency pair is seen near 1.6996 and 1.0700. A previous congestion zone at 1.0555-80, which was seen in December of 2013 and provides bears with a target. Momentum on the currency pair remains negative with the MACD (moving average convergence divergence) index printing in negative territory with a downward sloping trajectory.

China’s official June PMI hit a six-month high at 51, after 50.8 in May. The outcome was better than expectation, and affirms continued momentum in the Chinese economy. The final HSBC PMI, which focuses more on smaller private companies compared to the official PMI, painted a similar picture, coming in at 50.7, though having improved by a greater decline from May, which produced a 49.4 reading. Nine out of the 12 sub-indices pointed to improvement from the previous month’s official report.

During the North American session, key data is ADP jobs for June with consensus at +205k vs. +179k in May. Note that the ISM employment sub-index was steady at 52.8. The US also reports weekly mortgage applications followed by June Challenger job cuts, ADP private sector jobs, and ISM New York as well as May factory orders.

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