FOREX Watch: North American pair hits 5-week low
The US dollar fell more than half a percent against the loonie in European trade, sending the pair to five-week lows. The USDCAD fell below the 1.03 threshold after the former Secretary of the US Treasury Lawrence Summers dropped out of the race for Chairman of the Federal Reserve. According to some market participants, Summers was a leading candidate to succeed current Chairman Ben Bernanke, due to his strong intellectual and creative abilities, not to mention his track record in academic and government circles.
The USDCAD consolidated at 1.03 in the New York session, having fallen below two intraday supports leading up to the opening of the North American market. The pair’s next support level is situated at 1.0283.
The greenback closed out the previous week on the defensive after retail sales advanced below expectations in August and consumer confidence fell to five-month lows in September. Combined with weaker-than-forecasted jobs growth over the past two months, expectations have eased for a Federal Reserve asset taper later this week. However, a broad survey of economists still points to an asset taper to the tune of $10 billion in September, according to Bloomberg.
Despite the loonie’s rally, risks associated with the Canadian dollar outweigh its potential benefits in the immediate term. A stronger US economy will eventually lead to the reduction of stimulus, which could potentially send USDCAD to multiyear highs. From a macroeconomic perspective, a stronger US economy will be to the benefit of the Canadian economy as a whole. In 2014, the United States will account for 75 percent of Canada’s export market.
The Canadian calendar will remain relatively idle until Friday, when the Bank of Canada releases monthly and annualized consumer inflation data for August. The Consumer Price Index is expected to have risen 0.2 percent in August, according to economists surveyed by Bloomberg.
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