Friday's ETF Chart To Watch: CurrencyShares Canadian Dollar Trust

 |  About: CurrencyShares Canadian Dollar Trust ETF (FXC)
by: Stoyan Bojinov

Stocks on Wall Street edged higher with a few bumps along the way as investors digested a plateful of mixed economic data. Good news included improving jobless claims data as well as an increase in consumer spending. Worse-than-expected data kept the lid on gains; a slight downtick in manufacturing coupled with a bad month for construction spending reminded investors that the recovery at home is still fragile. Gold finished the day slightly higher near $1,720 an ounce, while crude oil futures hit a multi-month high of $110.55 a barrel [see Gold Hits Resistance, Time To Worry?].

Investors will turn their attention to Canada later today as a key GDP report is slated to come out. The Canadian dollar, commonly known as the Loonie, may experience volatile trading in the currency markets as investors react to the latest figure. Given this data release, our ETF to watch for today is the Rydex CurrencyShares Canadian Dollar Trust (NYSEARCA:FXC) which may see an increase in trading volumes [see FXC ETFdb Realtime Rating]. Analysts are expecting for GDP to come in at 1.9%, versus the previous reading of 2%.

Chart Analysis

The Canadian dollar has been chugging along higher alongside broad equity indexes for the past months, while a rally in crude oil has also been a big help. FXC has established a rising level of support since bottoming out at $93.29 a share on 10/4/2011. This ETF recently broke above its 200-day moving average (yellow line); however, its worth nothing that trading volumes have been less than impressive over the past few weeks, which may be interpreted as a sign of caution going forward [see FXC Technicals].

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This ETF may soon encounter selling pressures from a technical perspective; notice how FXC struggled to break above the $100-102 range back on 8/31/2011 and later again on 10/27/2011. Nonetheless, this ETF has been clearly trending upwards since October of last year and thus it’s likely “safer” to wait for a dip rather than try and call the top.


If Canada’s GDP takes an unexpected dip, investor may find themselves pulling the sell trigger on the Loonie in the currency markets. Likewise, FXC could find itself struggling to stay afloat if the U.S. dollar marches higher [see For ETF Investors, Currency Exposure Matters]. In terms of downside, the next level of support for FXC comes in at around $100 a share, while a break below the $99 level could accelerate selling pressures. On the other hand, if investors are pleased with the latest GDP report, FXC may find itself climbing higher. In terms of upside, this ETF could encounter selling pressures as it approaches the $102 mark. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Disclosure: No positions at time of writing.

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