untitled design

Canadian dollar retreats on crude oil decline, US data shows no sign

  • The Canadian dollar is dragged down by the fall in crude oil offers.
  • Housing construction starts in Canada are advancing, overshadowed by unemployment figures in the United States.
  • WTI crude oil falls below $74 per barrel.

He Canadian Dollar (CAD) is retreating to recent lows against the US Dollar (USD)as the drop in crude oil and the decline in risk appetite weighed on the CAD.

Canada saw a positive increase in the annualized number of housing starts in October, but the figure was completely overshadowed by a glitch in US initial jobless claims, which is dragging down market sentiment.

Daily summary of market movements: Canadian dollar retreats without support from crude oil

  • With US initial jobless claims hitting their highest level in nearly two years, the market narrative is tilting again toward fears of a harder landing than a soft one.
  • 231,000 new US jobless claims reported for the week of November 10, compared to 213,000 expected; the previous week it was revised from 217,000 to 218,000.
  • US industrial production also fell above forecasts, at -0.6% in October, compared to -0.3% expected. September Industrial production was just 0.1%, after a downward revision of 0.3%.
  • Housing starts in Canada for the year to October rose, with 274,700 new housing starts, well above the 252,900 expected, surpassing September’s reading of 270,700.
  • Despite capping production quotas, OPEC member countries continue to export more oil than expected, causing crude oil to plunge on Thursday.
  • WTI (West Texas Intermediate) crude oil is returning below $74 per barrel, removing support for the CAD in the markets.
  • CAD: Limited room for short-term gains – Scotiabank

Technical Analysis: Canadian Dollar bounces off 50-day SMA, USD/CAD sees rejection of uptrend line

USD/CAD reclaimed the 1.3700 area during trading on Thursday, setting up the pair for a further advance towards 1.3800.

Earlier in the week, USD/CAD made short-term lows at 1.3654, before bouncing off the 50-day SMA and an ascending trend line drawn from July lows near 1.3100.

Long-term technical support lies at the 200-day SMA, near the 1.3500 area. A bullish extension in USD/CAD will see bidders try to reach the 1.3900 November high again.

USD/CAD Daily Chart

Current rate of the Canadian dollar

Below is the percentage change of the Canadian Dollar (CAD) against the currencies listed today. The Canadian Dollar was the weakest currency against the Japanese Yen.

USD 0.04% -0.03% 0.64% 0.71% -0.39% 0.82% 0.13%
EUR -0.04% -0.06% 0.60% 0.66% -0.44% 0.77% 0.07%
GBP 0.03% 0.07% 0.68% 0.73% -0.36% 0.85% 0.15%
CAD -0.65% -0.57% -0.68% 0.04% -1.03% 0.17% -0.51%
AUD -0.70% -0.66% -0.74% -0.05% -1.10% 0.11% -0.59%
JPY 0.39% 0.44% 0.35% 1.04% 1.09% 1.20% 0.51%
NZD -0.81% -0.76% -0.85% -0.15% -0.11% -1.21% -0.69%
CHF -0.13% -0.07% -0.14% 0.53% 0.58% -0.51% 0.69%

The 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).

Frequently Asked Questions about the Canadian Dollar

What factors determine the price of the Canadian dollar?

The key factors that determine the price of 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 product, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market sentiment, that is, whether investors are betting on riskier assets (risk appetite) or looking for safe havens (risk aversion), with risk appetite being positive for the CAD. As a major 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 influence the Canadian dollar?

The Bank of Canada (BoC) significantly influences the Canadian dollar by setting the level of interest rates that banks can lend to each other. This influences the level of interest rates for everyone. The BOC’s main objective is to keep inflation between 1% and 3% by adjusting interest rates up or down. Relatively higher interest rates are usually positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the first being negative for the CAD and the second being positive for the CAD.

How does the price of oil influence the Canadian dollar?

The price of oil is a key factor influencing 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 value of the CAD. Generally, if the price of oil rises, the CAD also rises, as aggregate demand for the currency increases. The opposite occurs if the price of oil falls. Higher oil prices also tend to result in a higher probability of a positive trade balance, which is also support for the CAD.

How does inflation data influence the value of the Canadian Dollar?

Although inflation has traditionally always been considered a negative factor for a currency, as it reduces the value of money, the opposite has actually happened in modern times with the relaxation of cross-border capital controls. Inflation tends to lead central banks to raise interest rates, which attracts more capital from international investors looking for a lucrative place to store their money. This increases the demand for the local currency, which in the case of Canada is the Canadian Dollar.

How does economic data influence the value of the Canadian dollar?

Macroeconomic data releases measure the health of the economy and can influence the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can 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 raise interest rates, resulting in a stronger currency. However, if economic data is weak, the CAD is likely to fall.

Source: Fx Street

You may also like

Get the latest

Stay Informed: Get the Latest Updates and Insights


Most popular