Forex Investment and Currency Trading

Softer oil prices and the generally stronger USD tone – most currencies except the JPY are down against the US currency this morning – are keeping the CAD tone on the defensive. The CAD has been one of the weakest performing of the major currencies over the past week, with only the lowly pound faring worse, likely reflecting the build up of long CAD positioning amid increasing speculation of a push towards parity. BoC Governor Carney’s comments last week underlined the central bank’s ongoing focus on the currency and with Governor Carney speaking again today, the markets will retain a cautious approach on the CAD. The speech in Victoria comes relatively late in morning session, however; the BoC releases the text of the governor’s comments at 3.40pm ET and Mr Carney will hold a press conference at 5.00pm ET. Another issue that has hung over the local markets over the past few weeks – the risk of an early election – may also weigh on the CAD in the short term; PM Harper will deliver an update on the government’s stimulus measures this week, presenting the main opposition Liberal party with the chance to bring down the Conservative minority government down via a confidence vote later in the week. It remains to be seen whether the government can muster
enough support from the smaller opposition parties to remain in power. Despite these distractions, analysts retain a positive view of the CAD’s fundamental medium term prospects and  don’t think the currency is obviously “overvalued” against the USD. The short term picture does look less positive for the CAD from a pure price action point of view though and likely signals a continuation of the CAD underperformance for the moment, after the market failed to extend the slide below important support earlier this month. The rebound in the USD in the past week puts a retest of 1.1123 resistance on the radar as an obvious risk from here.