Published: Fri, 30 Jan 2009 15:39:15 +0100

USD/CAD Rises on Risk Aversion

There appears to be some modest risk appetite in currencies as the U.S. dollar comes of its highs of against the loonie. The fourth-quarter GDP report showed a decline of 3.8%, but markets appeared to be expecting a steeper 5.5% slowdown.

Canadian November GDP was released alongside the U.S. report, but the worse-than-expected reading was completely ignored by the markets. Economic growth in Canada fell 0.7% in November, agaisnt the consensus estimate of -0.4%.

Although the loonie is making small gains this morning, strategists said any gains should be limited as the trend for the USD/CAD is still higher.

Matt Perrier, currency analyst from BMO Capital Markets, said there is the potential for the cross to eventually retest the 1.2700 CAD to 1.3000 CAD resistance levels.

George Davis, chief technical analyst from RBC Dominion Securities, said he is looking for the USD/CAD to test short term highs at 1.2533 CAD and 1.2658 CAD.

"We maintained our medium-term technical price target at 1.2650 as we expect that valuation-driven pullbacks in USD/CAD will attract renewed buying interest based on the uptrend that has been in place since last October," he said.

The Canadian dollar was down 0.0060 to 0.8092 against the U.S. dollar.

The euro was up 0.0016 to 1.5908 against the Canadian dollar.

The Canadian dollar was down 0.958 points to 72.4222 against the yen.

The pound sterling was up 0.0113 to 1.7657 against the Canadian dollar.

The Canadian dollar was up 0.0177 to 1.2675 against the Australian dollar.

All Data taken at 9:25 a.m. EST

By Neils Christensen, neilsc@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

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