Sentiment-based forecasts aside, it will be important to monitor any and all developments in Crude Oil
markets and how commodity prices affect the highly-correlated Canadian Dollar
. Dramatic declines in key financial market risk barometers led a broader deleveraging and sunk crude oil prices to their lowest since February. The selloff leaves the West Texas Intermediate contract at key 10-month channel support, and a break below the $75 mark would invite further losses. It suffices to say that Canadian Dollar traders should keep a lookout for noteworthy drops in the all-important WTI contract.
Canadian economic data generally continues to impress, but recent Loonie
losses emphasize that there are other far more significant market movers for the domestic currency. A substantial upward surprise in the typically market-moving Employment Change report was barely enough to prevent a fourth consecutive daily CAD decline. We subsequently believe it could take a truly shocking surprise in any of the coming week’s Canadian economic data releases to force substantive shifts in the USDCAD. It may be far more important to monitor any and all developments in broader financial markets—especially as they relate to crude oil prices. - DR