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Daily Report: Canadian Dollar Breaches 2+ Year High on Commodity StrengthsCanadian dollar breaks key 0.9929 resistance against dollar and reaches highest level in more than two years as the year starts. The loonie is boosted by strength in commodities, including crude oil as well as base metals, with copper making new record high in Asia today. In additional there is additional support the Canadian dollar through government bond buying on the country's relatively much healthier fiscal status than US. CAD is also noticeably higher against European majors. Meanwhile, Euro remains generally pressured on concern that debt and peripheral issues remain unresolved. |
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| Featured Technical Report | |
USD/CAD Weekly OutlookUSD/CAD's break of 0.9929 support confirms that whole medium term down trend from 1.3063 is not finished and has resumed. Intraday bias remains on the downside for the moment further decline should be seen to 61.8% projection of 1.0671 to 0.9979 from 1.0207 at 0.9779 first. On the upside, above 0.9973 minor resistance will turn intraday bias neutral and bring recovery. But near term outlook will remain bearish as long as 1.0207 resistance holds. |
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| 2011 Currency and Monetary Policy Outlook |
Uneven Growth Story Prolongs EZ's Hard Time while Money-Printing Nature in SMP will Send Euro LowerThe sovereign crisis in the European periphery that triggered panic selling of the euro in 2010 will have further to run in 2011. Bailouts for Greece in May and Ireland in November failed to stem contagion to other countries. The market has speculated Portugal and Spain will the next to seek EU/IMF assistances. While EU financial leaders agreed to create a permanent debt-crisis mechanism in 2013, they failed to compromise on details of the plan and immediate steps to calm the market. Uneven growth prospects in core and peripheral European economies should remain a key issue in 2011.The widening divide of economic performance between Germany and peripheral countries would make ECB's policy outlook more challenging. While we do not foresee a breakup of the 16-nation region, it would be a tough year in 2011. US - A Shift from Monetary to Fiscal StimulusThemes dominated the global FX markets this year will remain in focus in 2011. For much of the time, US economic recovery and Fed's addition of QE were affecting USD's movement. QE2 will expire in June 2011 and therefore the market will find no clues on what's next in coming few months. In our opinion, extension of Bush-era rate cuts would boost US economic growth in coming 2 years. Together with signs of recovery over the past few months, the Fed will not need to extend unconventional measures as QE2 expires. Yet, the Fed will still keep the policy rate unchanged at 0-0.25% and maintain a dovish tone throughout the year. Stronger economic growth and an end to QE should be supportive for US dollar. In the Eurozone, sovereign crisis in peripheral economies may have further to run. We expect the euro will decline against the dollar in 1H11 before recovery seen thereafter. Break-up of the 16-nation region has been a hot topic this year. Indeed, we believe such worry is overdone. However, member countries will have a tough year in 2011. |
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Trade Idea: EUR/USD – Sell at 1.3350Despite last week’s rally to 1.3425, the subsequent retreat from there suggests a top has possibly been formed there and although the single currency has recovered after touching the Ichimoku cloud top, reckon upside would be limited to the Kijun-Sen (now at 1.3350) and renewed selling interest should emerge there, bring another decline later. Trade Idea: USD/JPY – Buy at 80.85Although the greenback has rebounded after falling to 80.95 last Friday and consolidation would take place, above the Ichimoku cloud bottom (now at 81.57) is needed to suggest a temporary low has possibly been formed and bring test of 81.84-86 (current level of the Ichimoku cloud top and previous resistance), otherwise, downside risk remains for one more fall to 80.80/85 Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||
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