Published: Mon, 09 Feb 2009 16:24:11 +0100

USD/CAD Under Pressure as Markets Wait for Financial Bailout Plan

Domestic data had no impact on the Canadian dollar as FX markets ignored Friday's surprising drop in employment in January and Monday's soft housing starts report, also for January.

Sentiment in the stock market remains relatively positive over Treasury Secretary Timothy Geithner's plans to save the financial system. His press conference, originally scheduled for today, was postponed until Tuesday.

The USD/CAD ran into strong selling at just below the 1.3000 level in overnight trading and is struggling to hold on to modest gains during the North American session. The cross is modestly higher on the day, up 0.42 cents to 1.2234 CAD.

Jacqui Douglas, currency strategist at TD Securities, said she expects USD/CAD to fall to 1.20 CAD as horrendous economic data fail to trigger massive selling of the loonie.

"If the worst employment data since 1975 cannot keep the CAD under pressure for more than a few minutes, the currency is perhaps not ready to sell off that much at all," she said.

Currency strategists from Citigroup are also bearish on the cross and are looking for it to test the December low of 1.1760. "Beyond that further losses down to the 200 (daily moving average) at 1.1162 would not be surprising," they said.

George Davis, chief technical analyst at RBC Capital Markets, is also looking for short-term gains in the loonie. "We note that Friday's sharp rejection of the 1.2500 region indicates that retracements to the trendline at 1.2404 should attract renewed short-term selling interest," he said.

The Canadian dollar was down 0.0016 to 0.8184 against the U.S. dollar.

The euro was up 0.0163 to 1.5942 against the Canadian dollar.

The Canadian dollar was down 0.488 points to 74.8700 against the yen.

The pound sterling was up 0.0215 to 1.8250 against the Canadian dollar.

The Canadian dollar was down 0.0089 to 1.2048 against the Australian dollar.

All data taken at 10:22 a.m. EST.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.