DFX: Canadian Dollar Eases as Commodity Prices Retreat
Canadian Dollar has eased on retreating commodity prices, with the gains in the USD this session helping to prompt profit-taking in oil, gold and base metals. Oil has dropped about $2 to $68.63 after the close above $70 in NY trading. Gold has retreated about $5 after the $30 rise on Tuesday. Copper prices have dropped over 3% in Asia as well. Certainly some of the CAD weakness is tied to broad USD gains seen after the U.S. election results. USD-CAD, which opened around 1.1500 in Sydney, rallied early in the session to highs of 1.1585, extending gains to 1.1603 following the U.S. election results. USD-CAD hit a three-week low of 1.1477 overnight, after talk of ongoing M&A flows driving the CAD buying interest. More negative anecdotal economic news has emerged on the CAD too with three forestry firms now cutting production and jobs due to falling demand. 1.1761 is the next upside target.
Meanwhile, EUR remains near session lows, with the currency pair down over two big figures from the highs of 1.3047 in NY. The market was caught long on EUR in Asia after stops were triggered at 1.3015 and 1.3030 in late NY but aggressive selling from a UK name capped the gains in NY though EUR still managed to hold above 1.3000 in early Sydney. The comments by ECB Stark warning of lower growth and lower inflation in the Euro-Zone helped pressure the single currency. Fund sales added to pressure on the EUR-USD with stops triggered on the break of 1.2900 with a low of 1.2812 seen so far. Currently, EUR-USD is at 1.2849, with support at 1.2800 and 1.2745 on a move lower. The outlook for the Euro-Zone looks grim with German papers Handelsblatt and Die Welt warning on the perilous state of the auto market. In Spain, Solbes warns that measures to address the crisis are practically "exhausted", while unemployment rose 192K to 2.8 mln, a record increase and the highest since Apr 1996 with one official forecasting a rise to 17% unemployment in 2010. In addition, household defaults have soared by 263% as the Spanish economy deteriorates.
