- The Canadian Dollar spent Thursday mostly hung in place on the charts before catching a moderate bid.
- Canada Raw Materials and Industrial Product Price beat expectations, but the market is focused elsewhere.
- Fed Chair Jerome Powell notes that policy is restrictive, but more could be needed, dropping the USD.
The Canadian Dollar (CAD) is catching a late break against the US Dollar (USD) as the Greenback recedes, walking back some of yesterday’s declines that saw the Loonie drop to its lowest prices against the USD since the start of October.
Canada Industrial Product Prices and Raw Materials Price Index numbers for September both beat expectations, but the low-impact data did little to push the CAD into deeper moves with most of the market focused on Federal Reserve (Fed) Chairman Jerome Powell giving a speech to the Economic Club of New York.
Daily Digest Market Movers: Canadian Dollar tunnels sideways, sees some late moves in post-Powell bid
- CAD mostly sticks to the day’s opening prices after testing the water in both directions.
- Canadian economic data is strictly low-impact for the day, leaving traders focused on external drivers.
- Speech from Fed Chair Powell saw an uptick in intraday volatility in USD-based FX pairs, but moves remain limited.
- USD/CAD is having difficulty extending moves beyond 1.3700 as Loonie hangs on firm.
- Crude Oil seeing minor uptick for Thursday, providing limited support for CAD.
- Fed Chair Powell notes that “Inflation is still too high”, and the labor market remains tight, but shows signs of cooling off.
- A softening USD bid is giving the CAD a chance to flip the day into the green.
- CAD traders to look ahead to Canadian Retail Sales on Friday.
- Jerome Powell says higher bond yields are producing tighter financial conditions
- Forex Today: Dollar slides after Fed’s Powell, Gold breaks above $1,970
Technical Analysis: USD/CAD tests the water beneath 1.3700 post-Fed appearance
The USD/CAD saw a late break beneath 1.3700 with intraday action getting pushed into the 50-hour Simple Moving Average (SMA) near 1.3680, with the 50% retracement level of yesterday’s bottom-to-top moves sitting at that price. A thin rebound for the pair sees the USD/CAD sifting chart paper near 1.3720 as Thursday winds up trading.
Momentum on the daily candlesticks continues to find support from a rising trendline originating from 1.3100, in conjunction with a bullish-leaning 50-day SMA driving into 1.3575 and building a technical support floor to catch any downside extensions in the USD/CAD.
The pair continues to test the boundaries of a descending trendline drawn from 2020’s extreme peaks of 1.4668, and upside momentum could get constrained moving forward as the near-term uptrend runs against long-term resistance.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.42% | -0.02% | 0.08% | 0.03% | 0.01% | 0.09% | -0.82% | |
| EUR | 0.43% | 0.31% | 0.47% | 0.45% | 0.43% | 0.49% | -0.39% | |
| GBP | 0.02% | -0.40% | 0.10% | 0.07% | 0.04% | 0.11% | -0.80% | |
| CAD | -0.07% | -0.50% | -0.10% | -0.08% | -0.03% | 0.04% | -0.89% | |
| AUD | -0.02% | -0.44% | -0.04% | 0.07% | -0.02% | 0.06% | -0.85% | |
| JPY | 0.00% | -0.46% | -0.06% | 0.05% | 0.02% | 0.07% | -0.85% | |
| NZD | -0.09% | -0.52% | -0.15% | -0.02% | -0.06% | -0.05% | -0.92% | |
| CHF | 0.79% | 0.37% | 0.78% | 0.87% | 0.80% | 0.80% | 0.88% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
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.
Source: https://www.fxstreet.com/news/canadian-dollar-looking-for-a-foothold-as-hawkish-fed-jostles-greenback-202310191653