- Canadian Dollar falls back as broader markets reverse into Greenback bids.
- Canada economic data continues to slump, Manufacturing PMI flubs expectations.
- Crude Oil continues to slip, dragging down the Loonie.
The Canadian Dollar (CAD) continues to ease back as the 2024 trading year gets underway, extending near-term declines against the US Dollar (USD) to fall a full percentage point as the first trading week of the new year gets underway.
The Canadian S&P Global Manufacturing Purchasing Managers’ Index (PMI) accelerated declines on Tuesday to print at a 43-month low as the Canadian economic outlook continues to deteriorate. The US Manufacturing PMI component also printed below expectations, keeping market risk appetite pinned on the low side and propping up the US Dollar on risk aversion.
Daily digest market movers: Crude Oil, risk aversion bite down on the Canadian Dollar as data misses the mark
- The Canadian Dollar is slipping back against the US Dollar as markets bid up the safe haven Greenback.
- The Canadian Manufacturing PMI printed a multi-year low of 45.4 in December, declining from November’s 47.7.
- The US Manufacturing PMI for December also missed the mark on Tuesday, printing at a four-month low of 47.9. The US PMI missed the market’s expectation of a steady reading from November’s 48.2.
- US Construction Spending also slumped in November, growing by a scant 0.4% versus the market forecast of 0.5%, though October’s MoM Construction Spending print saw a steep late revision from 0.6% to 1.2%.
- Markets have begun to walk back their previous sky-high bets of Federal Reserve (Fed) rate cuts through 2024, with money markets pricing in a median of 150 basis points of rate cuts by year-end.
- US data features heavily on the economic calendar this week, with 2024’s inaugural trading week rounding out the action with Friday’s US Nonfarm Payrolls (NFP).
- Wednesday brings US ISM Manufacturing PMI figures for December, forecast to tick upwards from 46.7 to 47.1, to be closely followed by the Fed’s Meeting Minutes from the latest Open Market Committee meeting.
- Thursday sees the US ADP Employment Change for December, forecast to rise from 103K to 115K, but the recently-inconsistent ADP preview is unlikely to match Friday’s NFP print.
- Friday sees December’s Canadian Unemployment Rate and annualized Canadian Average Hourly Wages, with Canadian unemployment expected to tick higher from 5.8% to 5.9% in December.
- Canadian Friday data can be expected to get overshadowed by US NFP figures, which are forecast to rebound from November’s 199K print to 168K in December.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.92% | 0.75% | 0.42% | 0.52% | 0.65% | 0.88% | 1.02% | |
| EUR | -0.78% | -0.01% | -0.35% | -0.25% | -0.26% | 0.11% | 0.21% | |
| GBP | -0.76% | 0.01% | -0.32% | -0.24% | -0.02% | 0.13% | 0.20% | |
| CAD | -0.42% | 0.34% | 0.53% | 0.08% | 0.22% | 0.45% | 0.56% | |
| AUD | -0.54% | 0.23% | 0.22% | -0.13% | -0.07% | 0.34% | 0.44% | |
| JPY | -0.64% | 0.29% | 0.18% | -0.03% | 0.05% | 0.43% | 0.31% | |
| NZD | -0.89% | -0.13% | -0.14% | -0.47% | -0.35% | -0.41% | 0.06% | |
| CHF | -0.97% | -0.21% | -0.21% | -0.53% | -0.42% | -0.34% | -0.06% |
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).
Technical Analysis: Canadian Dollar slips back from multi-month highs in early 2024
The Canadian Dollar (CAD) has shed around a full percent from Tuesday’s peak bids against the US Dollar, easing back from a 21-week peak and sending the USD/CAD pair rebounding from last week’s lows just below 1.3200.
The USD/CAD has climbed back over the 200-hour Simple Moving Average (SMA) for the first time since mid-December when the pair declined over 3% peak-to-trough from the 1.3600 region.
Despite a near-term rebound in the Greenback, the USD/CAD remains firmly planted in bear country with price action well below the 200-day SMA near the 1.3500 major handle, but the technical outlook favors bidders heading into the new trading year. Technical indicators are pinned firmly into oversold conditions, with both the Relative Strength Index (RSI) and the Moving Average Convergence-Divergence (MCAD) signaling ripe buying conditions as the indicators roll over.
USD/CAD Hourly Chart
USD/CAD Daily Chart
Dot Plot FAQs
The “Dot Plot” is the popular name of the interest-rate projections by the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed), which implements monetary policy. These are published in the Summary of Economic Projections, a report in which FOMC members also release their individual projections on economic growth, the unemployment rate and inflation for the current year and the next few ones. The document consists of a chart plotting interest-rate projections, with each FOMC member’s forecast represented by a dot. The Fed also adds a table summarizing the range of forecasts and the median for each indicator. This makes it easier for market participants to see how policymakers expect the US economy to perform in the near, medium and long term.
The US Federal Reserve publishes the “Dot Plot” once every other meeting, or in four of the eight yearly scheduled meetings. The Summary of Economic Projections report is published along with the monetary policy decision.
The “Dot Plot” gives a comprehensive insight into the expectations from Federal Reserve (Fed) policymakers. As projections reflect each official’s projection for interest rates at the end of each year, it is considered a key forward-looking indicator. By looking at the “Dot Plot” and comparing the data to current interest-rate levels, market participants can see where policymakers expect rates to head to and the overall direction of monetary policy. As projections are released quarterly, the “Dot Plot” is widely used as a guide to figure out the terminal rate and the possible timing of a policy pivot.
The most market-moving data in the “Dot Plot” is the projection of the federal funds rate. Any change compared with previous projections is likely to influence the US Dollar (USD) valuation. Generally, if the “Dot Plot” shows that policymakers expect higher interest rates in the near term, this tends to be bullish for USD. Likewise, if projections point to lower rates ahead, the USD is likely to weaken.
Source: https://www.fxstreet.com/news/canadian-dollar-extends-declines-against-greenback-on-softer-pmi-data-weaker-crude-oil-202401021752