Sell U.S. Dollar Against Canadian Currency, CIBC Analysts Say
By Chris Fournier
Oct. 15 (Bloomberg) -- Investors should sell the U.S. dollar and buy the Canadian currency because the pair reached an ``exhaustive top'' last week and the greenback should fall from there, CIBC World Markets analysts said.
The loonie, as Canada's dollar is known because of the aquatic bird on the one-dollar coin, last traded at C$1.1865 per U.S. dollar at 3:12 p.m. in Toronto. One Canadian dollar buys 84.31 U.S. cents.
``We favor an eventual move back towards C$1.08 to C$1.10 when calmer heads prevail,'' CIBC currency strategists Adam Fazio in New York and Shane Enright in Toronto wrote in a note today. ``Although this could be weeks away.''
Canada's currency fell to C$1.2125 on Oct. 10 before closing at C$1.1732. The spike and subsequent retreat may indicate ``an emphatic rejection of a certain price area,'' Fazio said in an interview. ``Something like that usually marks the beginning of the end of the move.''
A similar move in the opposite direction occurred in November when the currency gained to 90.58 Canadian cents, which formed an ``exhaustive base,'' the analysts wrote. U.S. dollar weakness peaked against the loonie in November at 14.6 percent below the 200-day moving average, while last week's ``panic- induced'' U.S. dollar strength peaked at 14.7 percent above that indicator, Fazio and Enright wrote.
Investors should sell the U.S. dollar at C$1.1775, add at C$1.1850 and put a stop at C$1.2050, the analysts wrote.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net
Last Updated: October 15, 2008 15:16 EDT
