Canadian Dollar chalks in a fourth consecutive down day, Loonie falls back further

The Canadian Dollar continues to lose ground, down 1% on the week.
Loonie traders will be looking ahead to Canada GDP figures next Tuesday.
Crude Oil prices also down for the week, draining support from the CAD.

The Canadian Dollar (CAD) is seeing more declines for Friday and is set to mark a fourth lower day in a row as Loonie traders are having a difficult time finding reasons to bid the CAD.

It’s a quiet market on Friday, but next week brings Canada Gross Domestic Product (GDP) numbers on Tuesday. CAD investors can expect to get jostled frequently by US data all through next week. The Federal Reserve (Fed) makes another rate call on Wednesday and US Non-Farm Payrolls (NFP) are slated for next Friday. The latter coincides with Canadian wages and employment figures.

Daily Digest Market Movers: Canadian Dollar continues backslide, Loonie tumbles against US Dollar

The CAD is down 1.5% and counting from the week’s highest bids against the USD.
Friday is set to be day number four of consecutive losses for the Loonie as markets bid the Greenback.
The BoC has a significant uphill climb before it as inflation risks continue to increase.
Canadian economic growth is also faltering, limiting the BoC’s policy toolkit.
Tuesday’s upcoming Canada GDP reading will be important for CAD traders, could see Canada’s technical recession steepen further.
Despite risks, BoC says they’re willing to raise rates further “if needed”.
Next week will close out with another US NFP print.

Technical Analysis: USD/CAD hits 12-month high, heading for 1.3900

The Canadian Dollar (CAD) is slumping into new lows for the year against the US Dollar (USD), sending the USD/CAD toward the 1.3900 handle on Friday. The pair is currently trading near 1.3870, and all it will take is one last push to reclaim the price level the pair hasn’t seen since October 2022.

A technical support zone from 1.3600 to 1.3650 stands nearby to bump any downside corrections, with the 50-day Simple Moving Average (SMA) rising into the 1.3600 handle to add further support.

Further beyond that, the 200-day SMA is turning bullish and catching some lift into 1.3500.

The USD/CAD is now up nearly 6% from 2023’s bottom bids of 1.3092.

USD/CAD Hourly Chart

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.13%	0.07%	0.46%	0.00%	-0.48%	0.30%	0.38%
EUR	0.15%		0.21%	0.60%	0.14%	-0.34%	0.44%	0.29%
GBP	-0.10%	-0.20%		0.21%	-0.12%	-0.59%	0.20%	0.31%
CAD	-0.47%	-0.40%	-0.37%		-0.48%	-0.92%	0.06%	-0.05%
AUD	0.02%	-0.10%	0.09%	0.47%		-0.46%	0.32%	0.43%
JPY	0.46%	0.32%	0.54%	0.91%	0.48%		0.79%	0.84%
NZD	-0.29%	-0.44%	-0.20%	0.17%	-0.30%	-0.77%		0.10%
CHF	-0.38%	-0.30%	-0.32%	0.10%	-0.43%	-0.70%	-0.04%

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).

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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