Canadian Dollar Loses Against Other Major Currencies As Wholesale Sales Get Down

The Canadian Dollar, more popular by the name of Loonie has fallen against most of its major counterparts. Loonie, incidentally, received its biggest gain in the last 30 days recently, as speculations were rife that the International Monetary Fund will classify Loonie and the Australian Dollar as reserve currencies. According to Dean Popplewell, the Head Analyst at Oanda Corp., the renowned currency-trading firm, any pull back of USD against Loonie is not going to be much significant. The reverse is true as well, unless, Loonie shows huge improvement against Euro. However, he added as the year end is approaching and the US economy is speculated to be under the threat of another recession, things can change sooner than ever. He also added that the market is still concerned about Middle East situation and until a cease-fire between Israel and Palestine can be reached, investors will stay cautious. Now, how this entire situation affects the Loonie is yet to be seen.

Loonie dropped by 0.2% against USD and is priced at 99.87 cents per USD currently. Yesterday, it was at 99.55 cents per USD at one time (The biggest value for Loonie since 8th November). The largest export of Canada, oil price has seen a decline as well. A barrel of oil now costs $86.73 in New York. On the other hand, the futures contract closed at $89.28, the highest settlement since 19th October, 2012.

David Bradley, who is the director at Scotia Capital Inc., rightfully stated that Loonie is going to be pretty much within a range for the time being, irrespective of its direction. As risk assets of the country has wind down before the Thanksgiving holiday in US, the Loonie may get a bit weaker though, he added.

In 2012, so far, Loonie has gained around 1.3% on average against its counterparts of the 9 developed countries. As the USD was unable to break strong resistance (Resistance is defined as an area in a forex chart which denotes that the sell order can be clustered) around the C$1.0050 mark, Loonie can actually break the greenback’s bullish trend momentum. Incidentally, this momentum has seen pace since September, 2012.

There are other possibilities of the direction of Loonie as well. If USD stays below C$1.0050 and eventually gets breakthrough around C$ 0.9900, it can see a dive down and then retest at 98.00 or 96.30 cents. Incidentally, 96.30 cents was last seen in August, last year. However, if USD is able to break through the resistance range of C$1.0050, it can go up further and finish around at C$1.0230.

Incidentally, the wholesale sales of Canada have fell down pretty fast in September. This mark the fastest fall of Wholesale sales in the country within last 19 months. Within all the categories, the personal good and automobiles sector have suffered the most. The sales dropped by 1.4% in September. And the total sales volume was at C$48.8 billion. This decline exceeds all previous forecasts made by several analysts and definitely served as a big blow for the Loonie. This report was published by Statistics Canada.

Canada’s economy is more dependent on the commodities and the next budget may have a detrimental effect on Canada’s commodity market in US. This possibility has caused junk bonds losing their appeal and according to the recently published Bank of America Merrill Lynch index data, the difference in yields on USD denominated junk bonds of Canada and the Federal Government Benchmarks reached to 575 basis points. This marks the biggest difference since August, 2012.

For the 2nd day on a row, Canadian bonds have also seen a decline. Therefore, the yield on 10-year benchmark security is up by 1 basis point. The 2.75 percent note, on the other hand, suffered a loss of 10 cents and is at C$108.80 currently.