Home Forex The Canadian dollar is trading near familiar levels on Thursday as markets await impressive data

The Canadian dollar is trading near familiar levels on Thursday as markets await impressive data

by SuperiorInvest


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  • The Canadian dollar is passing in the near term.
  • Canada sees an empty data bundle for Thursday.
  • Friday will wrap up the week with Canadian retail sales and consumer sentiment in the US Michigan.

The Canadian dollar (CAD) hovered around familiar levels on Thursday as broad market flows took the driver’s seat in the back half of the trading week. The Canadian dollar is more or less higher this week, but still down from an outperformance American dollar (USD) from Monday’s opening bids.

Canada will report November retail sales data on Friday, closely followed by the University of Michigan’s U.S. consumer sentiment index.

Daily overview of market movements: The Canadian dollar trades Thursday into Wednesday

  • Markets continue to digest the updated rate cut outlook as investors weigh a stubbornly strong economic outlook from the US.
  • US Initial Jobless Claims printed at 187 thousand for the week ending January 12, below the forecast of 207 thousand and decreased from 202 thousand of the previous week (revised downwards from 203 thousand).
  • Revisions continue to plague US data, but WoW Unemployment Claims sees only minor adjustments for now.
  • US Housing Starts also beat expectations, falling less than expected, and building permits beat forecasts.
  • US Housing Starts added 1.46 million new units to the nation’s housing supply, down from 1.525 million in the previous period (revised from 1.56 million), but falling short of the 1.4265 million expected.
  • U.S. building permits climbed to 1.495 million in December, up from 1.467 million the previous month and above the forecast of 1.48 million.
  • Markets continue to rumble as investors’ bets on faster and deeper rate cuts by the Federal Reserve (Fed) hit the wall of a stronger-than-expected U.S. economy and uneven inflation eases.
  • Fed officials continue to point to the need for slow progress as the chances of a March rate cut evaporate.

Canadian dollar price today

The chart below shows today’s percentage change for the Canadian dollar (CAD) against the major listed currencies. The Canadian dollar was strongest against the Swiss franc.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar 0.18% -0.13% -0.04% -0.23% 0.07% 0.11% 0.48%
euros -0.18% -0.33% -0.23% -0.43% -0.10% -0.12% 0.31%
GBP 0.15% 0.34% 0.11% -0.09% 0.23% 0.21% 0.64%
CAD 0.04% 0.24% -0.09% -0.19% 0.12% 0.11% 0.54%
AUD 0.23% 0.43% 0.10% 0.19% 0.29% 0.29% 0.74%
JPY -0.06% 0.12% -0.21% -0.11% -0.30% -0.01% 0.42%
NZD -0.02% 0.14% -0.22% -0.08% -0.26% -0.06% 0.45%
CHF -0.47% -0.30% -0.62% -0.52% -0.70% -0.41% -0.42%

The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).

Technical analysis: Canadian dollar avoids further losses, but US dollar remains strong

The Canadian dollar (CAD) is boosted by declines in the euro (EUR) and Swiss franc (CHF), down roughly 0.2% and 0.4%, respectively. The loonie is relatively flat across the rest of the major currency boards, within a fifth of a percent of the US dollar , pounds sterling (GBP), Australian dollar (AUD) and Japanese yen (JPY).

The US dollar saw an early rally on Thursday, pulling USD/CAD towards 1.3530 before markets stalled and pulled back into the mid-range, leaving the pair stuck in an intraday consolidation near 1.3500.

After a 2.4% recovery from the December low near $1.3177/CAD, it faces an overcongestion zone as the 50-day and 200-day simple moving averages (SMA) consolidate near 1.3500.

USD/CAD hourly chart

USD/CAD Daily Chart

Frequently asked questions about the Canadian dollar

The key factors that determine 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 and its imports. Other factors include market sentiment – ​​whether investors are taking on riskier assets (risk-on) or seeking safe havens (risk-off) – with risk-on being a positive CAD. The health of the US economy as its largest trading partner is also a key factor influencing the Canadian dollar.

The Bank of Canada (BoC) has significant influence on the Canadian dollar by setting the interest rates at which banks can lend to each other. This affects the amount of interest rates for everyone. The main objective of the BoC is to keep inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for CAD. The Bank of Canada can also use quantitative easing and tightening to affect credit conditions, the former being negative and the latter positive.

The price of oil is a key factor affecting the value of the Canadian dollar. Oil is Canada’s largest export, so the price of oil tends to have an immediate impact on the CAD value. In general, if the price of oil rises, so will the CAD, as aggregate demand for the currency increases. The opposite is the case if the price of oil falls. Higher oil prices also tend to lead to a greater likelihood of a positive trade balance, which also supports the CAD.

While inflation has always traditionally been seen as a negative factor for a currency as it reduces the value of money, in modern times with the loosening of cross-border capital controls, the opposite has been the case. Higher inflation tends to lead central banks to raise interest rates, which attracts more capital inflows from global investors looking for a lucrative place to keep their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.

Macroeconomic data assesses the health of the economy and can impact the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can all influence the direction of CAD. A strong economy is good for the Canadian dollar. Not only will this attract more foreign investment, but it may encourage the Bank of Canada to raise interest rates, leading to a stronger currency. However, if economic data is weak, the CAD is likely to fall.

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