Canadian Dollar Resumes Drive toward Parity

The USD CAD accelerated to the downside on Thursday, after breaking through a minor support price at 1.0152.

The USD CAD accelerated to the downside on Thursday, after breaking through a minor support price at 1.0152. Greater demand for riskier commodities such as gold and crude oil helped to pressure this pair lower. Recent government data suggests the economy is growing, putting the currency on track to reach parity with the U.S. Dollar. Speculators are also factoring in the strong possibility the Bank of Canada will raise interest rates before the Fed. Foreign traders are also finding the Canadian Dollar to be an attractive investment because of the country’s abundance of natural resources and the strength of its banking system.

The U.S. Dollar traded lower against most major currencies as traders took advantage of thin market conditions ahead of tomorrow’s key U.S. Non-Farm Payrolls Report. Early in the session the Dollar rose slightly following a decline in U.S. Weekly Initial Claims before being overcome by aggressive buying of higher yielding assets. Signs that the global economy may be recovering faster than previously thought helped to pressure the Dollar led by strong rallies in the British Pound and Canadian Dollar.

Some traders are discounting the rallies this week because of the U.S. Non-Farm Payroll Report on Friday. They feel that the lack of major players in the market helped contribute to the Dollar’s weakness. Early guesses are for the employment report to show an increase of between 200,000 and 300,000 jobs. Most of which is being attributed to government census hiring. This week’s ADP private employment report showed a surprise decrease of 24,000 jobs versus a guess of +40,000. Economists are saying that there is no correlation between the two reports.

The Euro traded higher one day after the main trend changed to up on the daily chart. Traders chose to ignore potential problems developing in Greece over its ability to finance its debt and instead decided to focus on improvements in the Euro Zone economy. The charts indicate this market is on target to test a resistance cluster at 1.3610 to 1.3620 after regaining a 50% level at 1.3452.

The GBP USD surged this morning following a better than expected U.K. manufacturing report and a positive poll showing that the chance of a hung parliament is decreasing. At the close, the British Pound was testing a 50% level at 1.5297. Overtaking this level could trigger an acceleration through the last swing top at 1.5381, turning the main trend to up.

The stronger Euro helped trigger an acceleration to the downside in the USD CHF through a 50% level at 1.0513 and a swing bottom at 1.0506. The sharp break came close to testing a .618 retracement level at 1.0423. The market stopped after testing 1.0434 before starting a massive short-covering rally on rumors of another intervention by the Swiss National Bank. Earlier in the trading session, the Swiss Franc reached a record high versus the Euro.

Strong demand for higher risk assets and the prospects of an economic recovery in the U.S. helped drive the USD JPY to a new high for the year. The market continued to gain throughout the day after breaking the January top at 93.77. The initial rally began when a story broke that Japanese investors were putting money into foreign stock markets to seek a better return because of the lower yields being offered in Japan.

The strong surge in U.S. equity markets helped the AUD USD regain its bullish trend after a one-day setback. News that the Chinese manufacturing index increased more than expected drove up the Aussie on the prospect of greater demand for Australian raw materials.

The NZD USD traded lower but made a comeback in reaction to a pick-up in demand for higher risk assets. Early in the session the New Zealand Dollar weakened in response to trader concerns that a rate hike in June by the Reserve Bank of New Zealand may not be a sure thing.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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