Bloomberg News

Dollar May Touch 2-Month High Versus Loonie: Technical Analysis

January 14, 2013

The U.S. dollar may climb toward a two-month high versus its Canadian counterpart after it failed to breach a key support level, Royal Bank of Canada said, citing trading patterns.

The greenback avoided piercing 98.26 Canadian cents, according to George Davis, the bank’s Toronto-based chief technical analyst for fixed income and currency strategy. A close above 99.37 may “expose a pocket of resistance defined by” C$1.0040 and the highs seen in November and August, Davis wrote in a report yesterday.

The U.S. dollar bought 98.38 Canadian cents as of 9:40 a.m. in Tokyo, little changed from its 98.37 close in New York. Canada’s currency is known as the loonie, named for the image of the aquatic bird on the C$1 coin.

C$1.0040 is the 50 percent Fibonacci retracement level of its decline from C$1.0447 on June 4 to 96.33 cents on Sept. 14, according to data compiled by Bloomberg. It was last seen on Nov. 16, when the greenback climbed to that month’s peak at C$1.0057. Its August high was C$1.0085, reached on Aug. 2.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break below support, or levels where there may be orders to buy, indicates it may decline to the next level. A breach of resistance, where sell orders may be clustered, signals an advance.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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