I see that the CAD had a tough day today:
---FXfocus: A major technical breakdown in the Canadian dollar today, which hit its worst levels in seven weeks against the greenback, Of interest, the loonie plowed through overhead support in the CAD1.513 area, which also marked the 38.2% Fibonacci retracement level of last year's bear market. In addition, we have seen a marked break of trendline support stemming from mid-November, while the MACD is in outright sell mode for the first time since early October when the currency entered a rather pronounced weakening trend that took it through the CAD1.55 area. While the mainstream press would love to tell you that the loonie's recent weakness has been a function of concerns that the Bank of Canada will have to cut rates aggressively in response to the slowdown in the US, that is only half the story.
Not surprisingly, we remain highly focused on the country's heightened trade tensions with Brazil. According to recent press reports, Canada's decision to ban Brazilian beef imports was indeed politically motivated (remember, Brazil and Canada have been duking it out for the 5 years over aircraft subsidies), and has only led to further tension with Brazil. Earlier today, we heard talk that Brazilian longshoremen refused to unload Canadian products at the port of Santos, and are now planning to block Canadian ships from even docking. In addition, union leaders are working frantically to convince longshoreman in the states of Rio de Janeiro, Parana, Espirito Santo and Santa Catarina to join the protest. As we have mentioned before, it is no coincidence that trade conditions have deteriorated in the face of a global economic slowdown, particularly when considering the moderation in consumption here at home. ----- |
