- The Canadian dollar falls and investors are betting on the dollar again.
- Crude oil extends Monday’s losses, thereby evaporating CAD support.
- The Bank of Canada will publish its latest Rates on Wednesday.
He Canadian Dollar (CAD) has fallen again to its lowest level in almost three weeks against the Dollar (USD)as overall market flows reverse direction and stack back into the Dollar, following the US Purchasing Managers’ Index (PMI) reading that far exceeded market expectations.
The Bank of Canada (BoC) will announce its latest rate request on Wednesday, and CAD traders expect the Canadian central bank to keep its benchmark rate at 5%, leaving open the possibility of further hikes later. Market participants expect little change in the BOC’s future guidance as Canadian policymakers grapple with a national economy seeing weak growth indicators but still elevated inflation due to rising energy prices.
Crude Oil prices are seeing a downward rebound on Tuesday, with West Texas Intermediate (WTI) adding to Monday’s decline. The oil-backed CAD is seeing its support base slip away as crude oil barrels retreat, pushing the CAD to its lowest prices against the USD since October 5.
Daily Market Summary: Canadian Dollar Pulls Back, While Broader Market Favors Dollar
- CAD falls to near three-week lows as investors flock to USD.
- US PMIs for October exceeded Wall Street forecasts and gains were recorded in the productivity indicator.
- The US Manufacturing PMI stood at 50, compared to the expected decline of 49.5 from the previous 49.8.
- The US Services PMI delivered an impressive reading, coming in at 50.9 and far exceeding the forecast of 49.9 versus 50.1 in September.
- The composite PMI stood at 51, its highest level since July.
- Crude oil continues to fall, taking CAD support with it.
- WTI barrels have fallen more than 7.5% from Friday’s high.
- BdC advance: maintains rates and the prospect of new increases is still alive.
Technical Analysis: Canadian Dollar Gives More Ground as Investors Favor US Dollar, USD/CAD Touches 1.3755
The Canadian Dollar (CAD) retreated almost 0.7% against the US Dollar (USD) in the session on Tuesday, while markets were bullish on the USD, taking the USD/CAD pair to its highest bids in almost three weeks.
USD/CAD touched 1.3755 on Tuesday, after reversing direction from an intraday low of 1.3661. The next immediate barrier for USD/CAD bulls will be the early October high at 1.3785, while the floor for sellers currently sits at the latest swing low near 1.3569.
The US Dollar has gained almost 5% against the Canadian loonie since the July low near 1.3090, and USD/CAD continues to find technical support at the 50-day SMA, which is currently rising to 1.3600.
A prolonged rally will lead USD/CAD to challenge the 2023 highs at 1.3862, while a complete bearish reversal will find the bottom near the 200-day SMA, currently parked just south of 1.3500.
USD/CAD Daily Chart
Current quote of the US dollar
The following table shows the percentage change of the US Dollar (USD) against major currencies today.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.76% | 0.72% | 0.34% | -0.29% | 0.07% | 0.17% | 0.32% | |
| EUR | -0.77% | -0.04% | -0.44% | -1.07% | -0.70% | -0.60% | -0.46% | |
| GBP | -0.73% | 0.03% | -0.39% | -1.03% | -0.67% | -0.57% | -0.42% | |
| CAD | -0.34% | 0.43% | 0.39% | -0.63% | -0.27% | -0.17% | -0.03% | |
| AUD | 0.30% | 1.06% | 1.01% | 0.63% | 0.36% | 0.47% | 0.60% | |
| JPY | -0.07% | 0.69% | 0.64% | 0.27% | -0.39% | 0.10% | 0.23% | |
| NZD | -0.17% | 0.61% | 0.56% | 0.17% | -0.47% | -0.10% | 0.14% | |
| CHF | -0.32% | 0.45% | 0.41% | 0.03% | -0.61% | -0.24% | -0.15% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen in the left column, while the quote currency is chosen in the top row. For example, if you choose the euro in the left column and scroll down the horizontal line to the Japanese yen, the percentage change that appears in the box will represent EUR (base)/JPY (quote).
Risk Sentiment FAQ
What do the terms “risk appetite” and “risk aversion” mean when referring to sentiment in financial markets?
In the world of financial jargon, the two terms “risk appetite” and “risk aversion” refer to the level of risk that investors are willing to bear during the reference period. In a market “risk appetite” , investors are optimistic about the future and are more willing to buy risky assets. In a “risk-free” market, investors start to “play it safe” because they are worried about the future and therefore buy assets less risky ones that are more likely to bring benefits, even if they are relatively modest.
What are the key assets to follow to understand risk sentiment dynamics?
Typically, during periods of “risk appetite”, stock markets rise, and most commodities – except gold – also appreciate as they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials strengthen due to increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds – especially major government bonds – rise, Gold shines and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar benefit.
Which currencies strengthen when the sentiment is “risk appetite”?
The Australian dollar (AUD), the Canadian dollar (CAD), the New Zealand dollar (NZD) and minor currencies such as the ruble (RUB) and the South African rand (ZAR) tend to rise in markets where there is an “appetite for risk.” This is because the economies of these currencies rely heavily on commodity exports for their growth, and these tend to rise in price during periods of “risk appetite.” This is because investors anticipate higher demand for raw materials in the future due to increased economic activity.
Which currencies strengthen when sentiment is “risk averse”?
The major currencies that tend to rise during periods of “risk aversion” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The Dollar, because it is the world’s reserve currency and because in times of crisis investors buy US public debt, which is considered safe because it is unlikely that the world’s largest economy will go into default. The Yen, due to the increase in demand for Japanese government bonds, since a large proportion is in the hands of domestic investors who are unlikely to get rid of them, even in a crisis. The Swiss franc, because strict Swiss banking legislation offers investors greater capital protection.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
