Home Forex The Canadian dollar on the firm side in thin Monday market action

The Canadian dollar on the firm side in thin Monday market action

by SuperiorInvest


  • Canadian dollar sees weak gains supported by steady oil supply.
  • Canada sees a data-driven economic calendar this week.
  • Markets start the new trading week calm ahead of key US inflation data.

The Canadian dollar (CAD) found some room on the high side on Monday and was in the green against most of its major currency counterparts in Monday's trading. Markets opened flat as investors braced for upbeat US economic data, with Tuesday's US consumer Price index (CPI) inflation print key focus for markets heavily invested in betting on rate cuts from the US central bank (Fed).

Canada is light on the economic calendar this week and the CAD releases in the dataset are strictly low impact. Thursday's Housing Starts are expected to improve slightly, while Friday's Wholesale Sales are forecast to be slightly lower. Overall, CAD streams can be expected to see the raw product Oil markets and American dollar (AMERICAN DOLLAR) willingness to take risks get behind the wheel this week.

Daily overview of market movements: The Canadian dollar is rolling in familiar technical territory

  • Quiet markets on Monday give the Canadian dollar a chance to rally higher, but the CAD remains positioned on a familiar chart.
  • Crude oil found some support on Monday and helped boost the CAD.
  • Saudi Energy Minister Abdulaziz bin Salman Al Saud said the Organization of the Petroleum Exporting Countries (OPEC) remains “ready to adjust oil policy at any time.”
  • Fed officials continue to reiterate a more dovish policy stance than markets are hoping for.
  • Fed's Bowman: It's too early to predict when or how much the Fed will cut rates.
  • More Bowman: Many risks remain for Fed's fight against inflation, doesn't see cuts in 'immediate future' appropriate.
  • The New York Fed's inflation outlook projects three-year inflation in January at 2.4%, down from December's three-year outlook of 2.6%.
  • According to CME's FedWatch tool, markets still see a nearly 60% chance of a May rate cut.
  • Money markets are still holding out hope for six rate cuts by 2024.

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 New Zealand dollar.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar 0.24% 0.10% -0.12% -0.13% 0.18% 0.24% 0.17%
euros -0.24% -0.14% -0.36% -0.37% -0.06% 0.01% -0.07%
GBP -0.10% 0.13% -0.22% -0.21% 0.08% 0.14% 0.07%
CAD 0.13% 0.35% 0.21% -0.02% 0.30% 0.37% 0.29%
AUD 0.13% 0.36% 0.24% 0.01% 0.30% 0.38% 0.30%
JPY -0.17% 0.06% -0.04% -0.29% -0.30% 0.06% -0.01%
NZD -0.25% 0.00% -0.15% -0.37% -0.38% -0.06% -0.07%
CHF -0.17% 0.08% -0.07% -0.29% -0.30% 0.01% 0.08%

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 sees green in quiet Monday chart action

The Canadian dollar is broadly higher on Monday and saw weak gains as markets prepare for another trading week. A calm Monday has the CAD on the high side for the day, up around a third of a percent against an overall weaker New Zealand Dollar (NZD) and Euro (EUR). The Canadian dollar is higher against the US dollar by about a tenth of a percent and almost flat against the Australian dollar (AUD).

USD/CAD remains tight below 1.3500 after last week's decline from around 1.3540, and intraday action continues to cycle through the 200-hour simple moving average (SMA) as near-term momentum remains limited.

Day candles have USD/CAD trading back into an overload zone south of the 200-day SMA near 1.3475, while the 50-day SMA is consolidating into an intermediate band near 1.3420, limiting bearish momentum and pushing the pair into the center.

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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