Canadian Dollar coiled in the midrange on Wednesday with all eyes on US CPI inflation
|Most recent article: Canadian Dollar struggles to recapture footing on Thursday as US CPI-inspired markets look elsewhere
- Canadian Dollar sees little momentum in tight Wednesday trading.
- Markets await the next update on US CPI inflation due Thursday.
- CAD finds little support from struggling Crude Oil bids.
The Canadian Dollar (CAD) stuck within a tight intraday range on Wednesday as broader markets pivot to focus on Thursday’s upcoming US Consumer Price Index (CPI) inflation print for December. Rate-cut-hungry markets will be looking for continued easing in price growth pressures from the US, but market forecast models are currently expecting a slight uptick in headline inflation figures.
Crude Oil caught a short-lived bounce on Wednesday, fueled by ongoing Middle East tensions and a fresh round of attacks on cargo ships by Houthi rebels. West Texas Intermediate (WTI) US Crude Oil fell back on the day after the Energy Information Administration (EIA) showed another surprise buildup in US Crude Oil stockpiles. The Canadian Dollar is getting less support from rising but choppy Crude Oil prices than usual as currency markets hunker down ahead ofUS CPI inflation.
Daily digest market movers: Canadian Dollar hamstrung in the midrange
- A quiet Wednesday for the Loonie with no further Canadian data releases on the economic calendar docket for the week.
- Canadian Dollar traders will be looking out for Canadian CPI inflation and Retail Sales next week, on Tuesday and Friday, respectively.
- US CPI inflation will dominate headlines and price action this week and is slated for release on Thursday.
- Broader markets are keeping an eye out for any data that will help tilt the Federal Reserve (Fed) into a rate-cutting cycle sooner rather than later.
- Thursday’s MoM US CPI from December is forecast to tick upward slightly from 0.1% to 0.2%.
- Annualized December CPI is also expected to shift from 3.1% to 3.2%.
- December’s MoM Core US CPI is forecast to hold steady at 0.3%, while the annualized Core CPI is seen ticking down from 4.0% to 3.8%.
- An upside beat to inflation data bodes poorly for the market’s rate-cutting hopes, could sever risk appetite if inflation continues to run above expectations.
- US CPI Preview: Forecasts from 10 major banks
- Crude Oil continues to struggle, rising and falling back as supply concerns centered around Middle East tensions play tug-of-war with downside pressure from rising US barrel counts.
- EIA US Crude Stocks climbed by 1.338 million barrels for the week ended January 5 versus the expected drawdown of 675K barrels, taking a chunk out of the previous week’s 5.5 million barrel drawdown.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.30% | -0.18% | -0.08% | -0.22% | 0.92% | 0.24% | -0.12% | |
| EUR | 0.31% | 0.14% | 0.22% | 0.11% | 1.23% | 0.55% | 0.21% | |
| GBP | 0.18% | -0.14% | 0.09% | -0.02% | 1.10% | 0.41% | 0.08% | |
| CAD | 0.08% | -0.22% | -0.09% | -0.13% | 1.01% | 0.32% | -0.02% | |
| AUD | 0.21% | -0.10% | 0.03% | 0.12% | 1.13% | 0.45% | 0.08% | |
| JPY | -0.94% | -1.24% | -1.12% | -1.01% | -1.11% | -0.72% | -1.03% | |
| NZD | -0.24% | -0.55% | -0.42% | -0.32% | -0.45% | 0.68% | -0.36% | |
| CHF | 0.09% | -0.19% | -0.07% | 0.03% | -0.09% | 1.03% | 0.35% |
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 skews sideways as markets mix in US CPI run-up
The Canadian Dollar (CAD) is mixed against the major currencies cadre on Wednesday, shedding a little less than a quarter of a percent against the Euro (EUR) but gaining a third of a percent against the New Zealand Dollar (NZD). The CAD also climbed around one percent against the battered Japanese Yen (JPY) thanks to a broad-market sell-off in the Yen.
The USD/CAD pair is swamped just below 1.3400, with intraday pressure skewing to the downside as the Loonie-Greenback pairing middles. Near-term price action remains buoyed by the 200-hour Simple Moving Average (SMA) near 1.3325, and bidders will be looking for continued support from a pattern of intraday higher lows driving the pair into the top end in early 2024 trading.
Daily candlesticks have the USD/CAD bid facing a slowdown of bullish momentum from the 1.3400 handle, and a technical ceiling is forming up near 1.3500 as the 50-day SMA heads for a bearish cross of the 200-day SMA. With topside action capped, a pullback could see the pair heading back into December’s lows near the 1.3200 handle.
USD/CAD Hourly Chart
USD/CAD Daily Chart
Canadian Dollar FAQs
What key factors drive the Canadian Dollar?
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.
How do the decisions of the Bank of Canada impact 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.
How does the price of Oil impact the Canadian Dollar?
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.
How does inflation data impact the value of the Canadian Dollar?
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.
How does economic data influence the value of 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.
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