Global equity markets were mostly down on the day yesterday as a variety of factors including Greece, oil, and holiday driven low liquidity contributed to the red figures, giving the market a feeling as if its mojo has been stolen. While the drop is predictably frustrating for the perma-bulls on Wall Street, a little volatility can be a welcome development as well, as investors can pile into those equities at cheaper prices. Much like Austin Powers in the comedy classic, The Spy Who Shagged Me, if the usual seasonal January Effect takes hold this year, investors will welcome lower levels with open arms as they reposition their portfolios and realize their mojo was there the whole time.
Of course, any movement in any market has an impact in the currency world as well, and the slight risk-off tone that has made its presence known has brought the USD/CAD to an intriguing level. Over the past month or so, the USD/CAD has given a textbook example of how a former trendline of resistance can transform itself into support. Starting in early December, this trendline squashed advances, but since around mid-December, it has supported any falls; and the market has returned to the line once again.
While the USD/CAD’s inability to advance beyond 1.1675 may be a little concerning for a few out there, the ability of the USD to persevere in recent history suggests that that particular hurdle may be cleared sooner rather than later; and if support remains firmly entrenched above 1.16, a breakout may be imminent.
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