The Canadian dollar is still under pressure following the strong falling of the Canadian Ivey PMI of July to 45.1 in the contracting territory below 50 from 68.2 in June which came after July Canadian non-farm payrolls figures which have shown adding just 7.1k jobs while the markets were waiting for 20k from 28.4k in June by the end of last week helping the US Dollar to get over 0.991 resisting level versus the Canadian dollar on the current risk aversion sentiment which has increased by S&P action of lowering the US long term debt rating to AA+ from AAA after the close of the US markets last week.
In the same time, the worries about the US growth outlook are still weighing negatively on the markets by the next Fed's meeting decision which even if it is to come with new QE3 or hint of doing it buying more treasuries notes, it can face difficulties in stimulating the economy as the current required austerity measures for tightening the governmental deficit by cutting its spending which can tackle the governmental supporting of the US economy which has started to show weak signs of growth as we have seen recently the down revision of US annualized GDP of Q1 to 0.4% from 1.8% in the previous reading and weaker than expected growing in the second quarter by 1.6% while it was foreseen to be 1.9% and also June US PCE which came down monthly by 0.2% while the markets were waiting for rising by rising by 0.2% from 0.1% in May showing worries about the US demand ability to support the economy at the current stance after ending of the US QE2 last June with the interest rate is actually near zero on the subsequences of the credit crisis which is strong reason of this debt crisis which is looking harder to be solved after the governmental carrying of the loss weight of the US housing markets exposing the US creditability of downside risks of revision with the current easing of growth pace and the market strong focusing of the debt in US and EU too.
From another side, The Canadian dollar is under pressure by the growing expectations of lower demand for oil from US as the Canadian economy depends on its exports of the raw materials and specially the oil to the US markets that's beside the collapse of June Canadian CPI to 3.1% yearly in June while the markets were waiting for easing to just 3.5% from 3.7% in May which lowered the market expectations of having a new interest rate hiking decision by BOC which gives much care to the US growth pace.
Although the Canadian dollar can find support from being a good safe haven option during the worries about debt in EU and US too beside the tensions in Libya which are supporting the oil prices too and God willing, further rising of US dollar versus the Canadian dollar can be met now by resistance at the parity psychological level and the breaking of it can be followed by 1.006 then 1.0379 while getting down from here can meet supporting levels at 0.9685, 0.96, 0.9567, 0.949 then 0.9405 again where it has formed its recent main bottom to these current rates.
FX Market Strategist
Walid Salah El Din