Canadian Dollar Hits Five-Year Low Following Weak Soft Data and Weaker Stocks

(CEP News) - The Canadian dollar continues to lose ground and is trading at five year lows against the U.S. dollar as the domestic data remains weak and North American equities lose more ground.

The selloff in the Canadian dollar started following a weaker than expected Canadian housing starts report. The pace of new housing starts in Canada fell for the sixth straight month, posting a 12.3% monthly slowdown and a nearly 46% drop from a year ago, the Canada Mortgage and Housing Corporation (CMHC) reported on Monday.

The weaker data has helped push USD/CAD through the October 2008 highs of 1.3017 CAD and hit a session high at 1.3058 CAD.

Currency strategists are now wondering how high the cross could go. Most are now looking for the new resistance point at 1.3500 CAD.

“We are in unchartered territory so it is very possible we could see those big figure moves,” said Sacha Tihanyi, currency strategist from TD Securities.

Although a target of 1.35 CAD is possible, Tihanyi said there are some signs that the cross could run out of steam before that. He said he is looking at an initial resistance point at 1.3330 CAD. But the broader gains will be determined by U.S. equity markets he added.

Shaun Osborne, currency strategist from TD Securities, said the move through 1.30 has been “in the card for a while.”

Although he doesn’t think the Canadian dollar should be this week, he said it is hard to ignore the trend. He added Friday’s Canadian employment report poses the most risk to the Canadian dollar. With the market expecting another weak report he said there is a very good possibility that 1.30 will hold as the new support level.

“It looks like USD/CAD could have more room to run on the upside,” he said.

Euro/USD down 0.59 cents to 1.2593

USD/CAD up 1.66 cents to 1.3038

USD/Yen up 0.73 points to 99.00

GBP/USD down 3.01 cents to 1.3791

AUD/USD down 0.62 cents to 0.6343

Euro/Yen up 0.31 points to 124.67

Euro/GBP up 1.54 pence to 0.9132

GBP/CAD down 1.66 cents to 1.7976

CAD/Yen down 0.45 points to 75.93

Euro/CAD up 1.35 cents to 1.6418

The U.S. Dollar Index is up 0.87 points to 89.38