- Analytics
- News and Tools
- Market News
- Canadian Dollar remains clipped near multi-year lows
Canadian Dollar remains clipped near multi-year lows
- The Canadian Dollar went nowhere quickly on Monday.
- Looming Bank of Canada rate call keeps CAD markets tepid.
- Investor sentiment finds a fresh patch of concern about US CPI inflation update.
The Canadian Dollar (CAD) struggled to find direction on Monday, kicking off a new trading week digging in near familiar lows. Broad-market sentiment has fizzled as investors are bracing for an expected uptick in US Consumer Price Index (CPI) inflation figures due during the midweek market session, and an overall lack of Canadian representation on this week’s economic calendar leaves Loonie traders in the lurch.
The Bank of Canada (BoC) is slated to deliver its latest rate call on Wednesday, around the time that the US will be releasing its latest CPI inflation figures, which are expected to accelerate slightly. With knock-kneed economic figures coming out of Canada, the BoC is expected to accelerate its pace of rate cuts once again, despite growing potential for another uptick in inflation figures that have hampered the domestic economy.
Daily digest market movers: A quiet start to the week has traders looking ahead
- Markets are coiling ahead of a blustery midweek showing on the data docket.
- Data releases remain thin in the early week.
- The BoC is widely expected to deliver another double rate cut on Wednesday, forecast to trim its main reference rate to 3.25% from 3.75%.
- The US’ upcoming CPI print is expected to show headline consumer-level inflation rise back to 2.7% from 2.6% YoY.
- Core US CPI inflation is expected to hold steady at a heady 3.3% annually.
Canadian Dollar price forecast
The USD/CAD daily chart illustrates a strong uptrend that has been intact since mid-September, with the pair climbing steadily above its 200-day EMA at 1.3726 and the 50-day EMA at 1.3912. The bullish momentum gained traction as USD/CAD broke above the 1.4000 psychological level in late October, consolidating gains in November. The pair recently approached the critical resistance zone near 1.4170, where multiple highs were recorded, signaling an area of strong selling pressure. This level aligns closely with the July peak and remains a significant barrier for bulls.
The most recent candle reflects indecision, closing near 1.4157, with a slight bearish tilt after failing to sustain a breakout above the 1.4170 resistance. Despite reaching an intraday high of 1.4175, the inability to close above this critical level could indicate weakening bullish momentum in the near term. However, the fact that the pair remains well above its 50-day EMA suggests the uptrend is still intact, with support likely to emerge around the 1.4000 handle on any pullbacks. A daily close above 1.4170 would open the door for further upside, potentially targeting the 1.4250 region.
The MACD indicator reflects mild bullish momentum, with the MACD line hovering slightly above the signal line and the histogram showing minimal positive growth. This setup suggests that while buyers remain in control, momentum is not overwhelmingly strong. Traders should watch for a breakout confirmation above 1.4170 for renewed bullish confidence or a move below 1.4050 to signal the start of a corrective phase. The broader trend remains constructive as long as the pair stays above the 200-day EMA, but short-term consolidation cannot be ruled out.
USD/CAD daily chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
