From a technical perspective, it appears that commodity currencies like the Canadian dollar, Australian dollar, and New Zealand dollar may all be due to recoup some of their massive losses.
Indeed, AUD/USD has run into trendline support going back to 3/2006, NZD/USD has held up above a rising trendline going back to late 2001, and USD/CAD has backed off from falling trendline resistance going back to mid-2004. Likewise, the plunge in commodities may be slowing down, as WTI crude oil futures were down as much as $2.50 on Wednesday, but ended the day down $0.35 at $109.38/bbl, right near the 200 SMA. From a fundamental perspective, the only real contributing forex market-mover was the Bank of Canada’s rate decision. While they did not change the Bank Rate from its current level of 3.00 percent, the Bank’s Governing Council said that rates are "appropriately accommodative," suggesting that they had no intention of even considering reducing rates. This runs counter to Credit Suisse overnight index swaps, which are pricing in approximately 50bps worth of cuts within the next 12 months, and explains why the Canadian dollar rallied on the news. In the next 24 hours, there is little event risk on hand for the Loonie, Aussie, and Kiwi, but given technical factors my bias is for the commodity dollars to recover further through the end of the week.
Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.
