Friday’s ETF Chart To Watch: CurrencyShares Canadian Dollar Trust (FXC)

by on May 18, 2012 | ETFs Mentioned:

Equity markets tumbled into red territory for another day this week as investors fretted over sour economic data on the home front along with looming debt woes in the European currency bloc. Weekly jobless claims came in worse-than-expected as 370,000 people filed for unemployment benefits versus the expected 365,000. The Philly Fed manufacturing index also gave investors a reason to worry after this month’s reading came in at a negative 5.8, falling short of the 10 estimate as well as the previous reading of 8.5 [see also Which ETFs Will Own Facebook (And When)]. 

Investors will turn their attention to the north later today as the latest Canadian CPI data hits the street. As such, our ETF to watch for the day is the Rydex CurrencyShares Canadian Dollar Trust (FXC) as it may see an increase in trading volumes following the release of inflation data. Analysts are largely expecting for CPI to come in unchanged at 1.9%, although a surprise in either direction could lead to volatile trading for FXC [see also 3 ETFs For A Euro Zone Double-Dip]. 

Chart Analysis

This week has shaped out to be quite rough for the Canadian dollar as looming Euro zone debt woes have been bolstering the U.S. greenback higher versus major currencies. Notice the trading range for FXC since late February of this year; this ETF oscillated between the $101 and $99 levels for nearly 3 months. What’s worrisome this time around is that FXC appears to have broken its level of support, seeing as how it has traded below $99 a share, as well as its 200-day moving average (yellow line), for two full days thus far. 

Click To Enlarge

Another piece of bearish evidence is the fact that FXC does not appear to have major support until around $96 a share, which means that further downside is very likely for this ETF in the foreseeable future [see also 5 Simple ETF Trading Tips]. 

Outlook

If Euro zone woes ease up, the Canadian dollar may have a much better chance at regaining its footing, although the latest CPI report is sure to hold some weight as well. As such, if the latest CPI report paints an optimistic picture, FXC could stabilize around $98 a share and potentially make a run towards its 200-day moving average at around the $99 level. On the other hand, a bearish reaction to Canada’s inflation report will surely welcome selling pressures. In terms of downside, FXC could slide to $97 a share or even lower, while major support comes in roughly at around the $96 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques [see also Free Report: How  To Pick The Right ETF Every Time].

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Disclosure: No positions at time of writing.