- Canadian Dollar gives away gains as USD bounces up following strong Retail Sales data.
- Investors’ concern that Middle East conflict might escalate provides additional support to the safe-haven US Dollar.
- Oil prices have depreciated nearly 3.5% from early April highs, adding negative pressure to CAD.
The Canadian Dollar (CAD) recovery attempt seen during Monday’s European session has been short-lived. The US Dollar has resumed its bullish trend as better-than-expected retail consumption data has confirmed the strong momentum of the US economy.
The strong Retail Sales figures come after last week’s sticky inflation numbers, strengthening the view that the Federal Reserve (Fed) will be keeping rates higher for longer. This is supporting the US Dollar, which has additional support from the volatile situation in the Middle East. Israel is considering retaliating against Iran, which could spark a regional conflict, which ultimately increases demand for the USD on the back of its safe-haven status.
In Canada, February’s Manufacturing Sales data improved, as expected, although Wholesale Sales stalled. Furthermore, Oil prices, Canada’s main export, are pulling back from last week’s highs, adding pressure to the Loonie.
Daily digest market movers: USD/CAD maintains its bullish tone on bright US data and risk aversion
- Canadian Dollar retraces previous gains, with the USD bouncing up as US Retail Sales increased beyond expectations in March.
- US Retail Sales increased 0.7% in March from 0.9% in February, well above the 0.3% increment expected by the market.
- Excluding autos, total sales of retail and food stores have risen 1.1%, their best reading since January 2023. The market had expected a 0.4% advance.
- NY Fed President John Williams has acknowledged the importance of the recent inflation levels but assured that he expects rate cuts to come this year.
- Canada’s Manufacturing Sales increased 0.7% in February from 0% in the previous month, in line with the market forecasts.
- Canadian Wholesale Sales, however, stalled in February against market expectations of a 0.8% increase.
- WTI Oil prices have retreated to two-week lows at the mid-range of $84, down from the $87.60 high reached over the previous weeks.
Canadian Dollar price in the last 7 days
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies in the last 7 days. Canadian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.87% | 1.42% | 1.25% | 1.89% | 1.64% | 1.59% | 1.07% | |
| EUR | -1.91% | -0.45% | -0.61% | 0.02% | -0.25% | -0.27% | -0.81% | |
| GBP | -1.45% | 0.45% | -0.18% | 0.47% | 0.21% | 0.16% | -0.38% | |
| CAD | -1.28% | 0.61% | 0.18% | 0.63% | 0.38% | 0.34% | -0.21% | |
| AUD | -1.92% | -0.02% | -0.47% | -0.65% | -0.25% | -0.30% | -0.86% | |
| JPY | -1.65% | 0.26% | -0.17% | -0.35% | 0.25% | -0.01% | -0.57% | |
| NZD | -1.61% | 0.25% | -0.19% | -0.34% | 0.30% | 0.02% | -0.56% | |
| CHF | -1.08% | 0.80% | 0.36% | 0.20% | 0.82% | 0.57% | 0.52% |
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: USD/CAD remains bullish, with downside attempts limited above 1.3700
The US Dollar maintains the bullish bias intact, with the Loonie’s recovery attempt capped well above previous highs in the 1.3700 area so far.
The pair broke the top of last month’s trading channel last week and is now testing the resistance area at 1.3780. The USD/CAD pair is at overbought levels but not at extremes, with the measured target of the broken channel at the mid-November high of 1.3845. On the downside, supports are 1.3680-1.3660 and below there, at 1.3545.
USD/CAD Daily Chart
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.
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