Published: Wed, 18 Feb 2009 20:48:51 +0100

Canadian Dollar Remains Vulnerable Despite Short Term Rise

(CEP News) - The Canadian dollar has not been able to find any momentum in what has been a relatively quiet day in currency markets.

Although the loonie is showing some gains against the U.S. dollar, the USD/CAD continues to trade above key resistance levels. The USD/CAD is down 0.53 cents to 1.2601 CAD

Tyson Wright, senior FX trader at Custom House, said it appears that 1.25 CAD is going to act as the new support level and that it could take a substantial move lower to change the overall trend in the USD/CAD.

"I think there is more upside potential to test 1.2750 CAD," he said. "Any rally in the Canadian dollar today has been met with fierce support."

According to Jacqui Douglas, currency strategist from TD Securities, the talk of merger deals is helping to provide some support for the loonie, although it could just be short-term.

Most strategists are expecting the USD/CAD to continue to trend higher and eventually test the 1.30 level. With little Canadian data to provide direction, the loonie will continue to trend off U.S. dollar momentum.

With weekly U.S. jobless claims and the Philadelphia Fed survey scheduled to be released on Thursday, the markets will be sensitive to risk aversion sentiment.

Economists are expecting initial jobless claims to remain above 600,000, and for the Philly Fed survey to remain weak, falling to a reading of -25.

Euro/USD down 0.40 cents to 1.2544

USD/CAD down 0.52 cents to 1.2602

USD/Yen up 1.34 points to 93.74

GBP/USD down 0.23 cents to 1.4216

AUD/USD up 0.38 cents to 0.6388

Euro/Yen up 1.31 points to 117.57

Euro/GBP down 0.15 pence to 0.8822

GBP/CAD down 1.01 cents to 1.7917

CAD/Yen up 1.35 points to 74.39

The U.S. Dollar Index is up 0.46 points to 88.04

All data taken at 2:46 p.m. EST

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