The better than expected GDP figure out of the US gave the Canadian dollar reason to fall as bets on a Fed taper will be sooner than later. Commodities and stocks were laggards, as well. The unsettling paradigm of good news is bad news is taking hold.
“Every time there’s good news, the market thinks, ’Oh no, there’s not going to be as much cheap money,” Jane Foley, senior currency strategist at Rabobank International. The signal of a potential taper allowed the dollar to increase versus most its peers, including the Canadian dollar. However, the gain was limited as Canada had a solid jobs report after gaining 11K jobs versus 193K in the previous report.
“What you’ve seen is upward pressure on any U.S. dollar cross as the market has decided that betting against the buck might not be the wisest move,” Brad Schruder, director of foreign exchange at Bank of Montreal.
Canada’s largest export, crude, took a hit on the positive US news and dollar gain.
The move in the Canadian dollar is weakening as price action is beginning to consolidate under the descending trend line. The +DMI and ADX is weakening as the Canadian dollar is weak, but holding its own. Support is still holding at 1.0420 with resistance at 1.0489. It’s a tight range.
However, the US non-farm payrolls will help facilitate a move in either direction. Canada also has employment data tomorrow morning, but any strength could be overshadowed by the market’s speculation on when a taper may or may not happen.