Euro May Gain Versus ‘Bearish’ Canadian Dollar, RBC Says
By Chris Fournier
Dec. 12 (Bloomberg) — The U.S. dollar’s five-month rally versus the Canadian currency has stalled, making the euro, the Australian dollar and the yen better bets against the loonie, according to RBC Capital Markets.
“Bearish fundamentals for the Canadian dollar continue to mount,” Toronto-based RBC strategists David Watt, Matthew Strauss and George Davis wrote in a note today. “Crosses are seen as offering a better tactical opportunity.”
The 15-nation currency broke through C$1.6364 this week, the top end of a range in which it traded since March, according to RBC. It also pierced a double top, formed when an exchange rate hits two consecutive peaks.
The euro may increase to a resistance level of C$1.6702, the strategists said. Resistance is where orders to sell a currency are clustered. The currency gained 0.6 percent to C$1.6594 today.
Bearish developments for Canada’s currency include a narrowing of the nation’s trade surplus and a plunge in crude oil prices, according to RBC. Crude oil is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.
The U.S. dollar has formed a potential triple top of C$1.3017, RBC said. The pattern, created when three consecutive peaks are reached, indicates a currency may fall.
To contact the reporter on this story: Chris Fournier in Montreal atcfournier3@bloomberg.net
Last Updated: December 12, 2008 13:06 EST