Canadian Dollar strengthens
The Canadian Dollar (USDCAD) strengthened as demand for the US currency fell straight through expected (short-term) support at 1.3300. There are a few general reasons why the Dollar might be softening against its northern neighbour, such as the suspicion that the Fed may have to adjust its fairly neutral policy to keep the US economy stimulated in the face of the weaker trend in economic data, and the rise of the Oil price to a shade under $60/bbl, both of which are positive for the Canadian currency, but the most common reason for a sharp slide such as we’ve seen today is simply that the market has been caught slightly long of Dollars and in such cases it tends to follow the path of least resistance. It would certainly seem that Stop Losses have been triggered to add further impetus. Given that the key risk to the $/CAD pair now lies with the FOMC monetary policy announcement due at 18:00 GMT tomorrow, we’d expect to see the key rising support level at 1.3160 remain intact until then at the very least. Whilst we do not expect to see any major surprises from the FOMC, as usual the devil will be in the detail of their accompanying statement.