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Canadian Dollar Tumbles to more than 4-Week Low

H.S. Borji
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Canadian Dollar Tumbles to more than 4-Week Low

The Canadian dollar declined further against its US counterpart Friday, tumbling to a more than four-week low amid stronger demand for the greenback.

The loonie, as Canada’s currency is called, declined 0.29 percent to 0.9279, its lowest level since June 20. The loonie is pacing for a weekly decline of 0.37 percent against the greenback.

The Canadian dollar has tumbled more than half a percent since July 1.

The USDCAD pair climbed 0.31 percent to 1.0778. The pair, which is trading well below its long-run average, is testing the 1.0777 resistance. A breach of this level would send the pair above the 50-day exponential moving average. On the downside, initial support is likely found at 1.0720.

The US dollar had gained momentum in the European session after German business confidence data fell for the third consecutive month, as the crises in the Ukraine and Middle East continued to dampen sentiment.

In North American data, US durable goods orders advanced at a stronger pace than forecast in June, although a decline in core capital goods shipments raised concern second quarter growth was subdued.

US durable goods orders rebounded in June, accelerating 0.7 percent, the Commerce Department reported today. Durable goods orders excluding transportation equipment increased 0.8 percent.

The United States has a heavy release schedule next week, including second quarter GDP data and July nonfarm payrolls.

Canada had no economic data to report Friday. Earlier this week Statistics Canada said retail sales increased 0.7 percent in May, offering hope consumer demand was driving economic growth for the world’s eleventh largest economy.

The Canadian economy continues to struggle with inconsistency. The economy accelerated just 1.2 percent annually in the first quarter, as severe weather weighed on business spending, government spending and household consumption.

Stripping away the addition of imports, Canada’s economy contracted at an annual rate of 0.3 percent in the first quarter.

Real GDP growth in the Q1 was 0.3 percent, the slowest quarterly gain since 2012.

Speculators continue to bet against the Canadian dollar, which is expected to drop below 90 US cents this year. The Bank of Canada favours a weaker local currency and has implied as much in successive interest rate meetings, where it has “talked down” the loonie.

Nevertheless, the Canadian dollar has been propped up by stronger than forecast consumer inflation. June marked the third consecutive month the consumer price index was at or above the central bank’s 2 percent target. BOC Governor Stephen Poloz says the rise in inflation is due to temporary factors such as higher energy costs.

Annual consumer inflation rose to 2.4 percent in June, a 28-month high.

In other trading, the loonie tumbled against the euro, as the EURCAD climbed 0.12 percent to 1.4483. The pair faces support at 1.4437 and resistance at 1.4514.

Canada’s currency tumbled against the Japanese yen, as the CADJPY declined 0.3 percent to 94.44. The pair is testing initial support at 94.49. Below this level, 94.23 is the next target. On the upside, initial resistance is likely found at 94.96.

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