CAD rinsed as Oil slides

Following on from yesterday's commentary, the Canadian dollar has continued its rout overnight alongside its old cohort, crude oil. With its vast oil reserves, it’s no coincidence that the Canadian economy and its currency have an affinity to the price of crude oil. Meanwhile the CAD has been hit with a new round of selling with the USDCAD pair hitting fresh 11-year highs and experienced solid losses against Japan’s Yen. And it’s not just about its performance against the greenback. Using other commodity-link currencies as a rough control both the Aussie and Kiwi have outperformed the CAD over the last month. Importantly, this says as much about the Aussie’s separation from Iron ore, as it says about the CAD. But it’s worth pointing out the AUD and NZD have gained around 5 percent against the CAD over the last month.

The CADJPY trade was the focus of Tuesday’s technical report, with analyst Adam Taylor noting the risks remain to the downside, notwithstanding conflicting technical signals.   The pair has moved down from 91.15 to a low of 90.12 overnight, roughly a 100 pips. Price action is currently hovering around 90.50. After the sell signal triggered at 90.75, the analysis would suggest the medium term targets of 89.75 and 89.25 remain unchanged.

CADJPY Point & Figure Analysis

Over to the Orient and data from China today included CPI and PPI.  Consumer prices recorded annual growth of 1.5 percent in November. Still, it’s the producer prices data that is seen as a bad omen, with inflation at a producer level falling 5.9 percent on year. It may be a whisker better than expected, but overall seen as indicative of demand constraints as well as lower commodity prices.

To the A$, and there hasn’t been a great deal of movement today, but there’s plenty on the horizon to keep things interesting. Apart from the daily cut and thrust of US dollar demand, tomorrow’s jobs data is the next key indicator that’s worth watching. Certainty, if we see anything solid it may squeeze more shorts with a subsequent move back into the 73 US cent region. Early forecasts suggest the official unemployment rate my edge up to 6 percent from 5.9 in September. Still, the domestic economy has a habit recently of upside surprises with solid exports and GDP data last week keeping the Aussie well bid, notwithstanding further losses in commodities.