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Canadian Dollar Starts Weak on Quiet Monday

  • The Canadian dollar is holding mostly steady on Monday, with price momentum limited.
  • Canada has a strictly low-level presence on the economic calendar this week.
  • Markets will be keeping an eye on Fed Chairman Jerome Powell’s Monetary Policy Report.

He Canadian Dollar (CAD) The USD/CAD remained mostly in familiar territory on Monday, trading softly against the US Dollar (USD) as markets recovered from last Friday’s glut of US jobs data. Monday dawns with calmer markets after US jobs figures capped recent CAD gains, with USD/CAD marking a tight range just below 1.3650.

Canada is almost entirely absent from the economic calendar this week, leaving the CAD adrift against broader market flows. Key US inflation and activity data are due out throughout the week, with market participants looking to pinpoint the exact timing of the pace of Federal Reserve (Fed) rate cuts going forward.

Market Movers: Canadian Dollar Mostly Stable Early Monday

  • Key CAD data is absent this week, with CAD traders forced to wait for crumbs from Friday’s low-level building permits.
  • US markets are expected to remain quiet ahead of the first of two appearances by Fed Chairman Jerome Powell on Tuesday, who will deliver his Semi-Annual Monetary Policy Report to the US Senate Banking Committee.
  • A series of appearances by other Fed policymakers are scheduled for the first half of the trading week.
  • The US Consumer Price Index (CPI) is due on Thursday, with the Producer Price Index (PPI) due on Friday.
  • Investors will be looking for a further slowdown in US inflation data to help push the Fed closer to a rate cut in September.

Canadian Dollar PRICE Today

The table below shows the exchange rate of the Canadian Dollar (CAD) against major currencies today. The Canadian Dollar was the strongest currency against the Australian Dollar.

USD 0.06% -0.05% -0.02% -0.09% 0.16% 0.07% 0.09%
EUR -0.06% 0.09% 0.24% 0.17% 0.26% 0.34% 0.37%
GBP 0.05% -0.09% 0.10% 0.09% 0.16% 0.25% 0.27%
JPY 0.02% -0.24% -0.10% -0.07% 0.19% 0.24% 0.17%
CAD 0.09% -0.17% -0.09% 0.07% 0.20% 0.16% 0.20%
AUD -0.16% -0.26% -0.16% -0.19% -0.20% 0.09% 0.10%
NZD -0.07% -0.34% -0.25% -0.24% -0.16% -0.09% 0.03%
CHF -0.09% -0.37% -0.27% -0.17% -0.20% -0.10% -0.03%

The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the chart will represent the CAD (base)/USD (quote).

Technical Analysis: Canadian Dollar Holds Ground on Quiet Monday

The Canadian Dollar (CAD) moved into generally higher territory on Monday as market focus shifted elsewhere, leaving the CAD adrift in familiar territory. The Canadian Dollar rose around a quarter of a percentage point against the New Zealand Dollar (NZD) and Swiss Franc (CHF), but is trading flat elsewhere, trading within a tenth of a percentage point against the US Dollar, Euro (EUR), British Pound (GBP) and Japanese Yen (JPY).

The NFP-driven USD/CAD bounce last Friday has been met with low-volume rocks, and the pair’s recovery from above 1.3600 remains within reach of fresh lows. Further downside is still expected if the dollar bulls fail to push the pair above the 200-hour exponential moving average (EMA) at 1.3660.

USD/CAD Hourly Chart

USD/CAD Daily Chart

The Canadian Dollar

The key factors determining the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of oil, Canada’s main export, the health of its economy, inflation and the trade balance, which is the difference between the value of Canadian exports and its imports. Other factors include market sentiment, i.e. whether investors are betting on riskier assets (risk-on) or looking for safe assets (risk-off), with risk-on being positive for the CAD. 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) exerts significant influence over 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 high interest rates are generally positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former being negative for the CAD and the latter being positive for the CAD.

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 rises as well, as aggregate demand for the currency increases. The opposite occurs if the price of oil falls. Higher oil prices also tend to lead to a higher probability of a positive trade balance, which also supports the CAD.

Although inflation has traditionally always been considered a negative factor for a currency, as it reduces the value of money, the opposite has actually occurred in modern times, with the relaxation of cross-border capital controls. Higher inflation typically leads central banks to raise interest rates, which attracts more capital inflows from global investors looking for a lucrative place to store their money. This increases demand for the local currency, which in Canada’s case is the Canadian dollar.

The released macroeconomic data measures 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 confidence 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 can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.

Source: Fx Street

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