The Canadian dollar depreciates on Thursday awaiting the US NFP.

  • The Canadian dollar retreated against most of its peers.
  • Crude oil prices appear to have found a floor for now, easing downward CAD pressure.
  • The US NFP will be published on Friday.

The Canadian Dollar (CAD) continues to trim recent gains, losing weight or flattening against all major currencies, losing ground across the major currency board.

On Wednesday, the Bank of Canada kept interest rates at 5%, in line with market expectations, boosting the Canadian dollar. Now that investors have had time to chew through the BoC statement, it appears that the Canadian central bank was not as tough as it initially seemed.

The Canadian Dollar is paring its gains from Thursday, as investors readjust their exposure to the CAD ahead of another important US Non-Farm Payrolls (NFP) data to close out the trading week on Friday.

Daily Market Summary: Canadian Dollar weakens as markets focus on US NFPs

  • Markets take a breather ahead of Friday’s NFP.
  • Canadian building permits recovered less than markets expected in October, rebounding 2.3% versus the 2.9% forecast.
  • September building permits fell -8.1% after being revised down from -6.5%.
  • Initial US jobless claims for the week ending December 1 came in slightly ahead of expectations, helping to bolster stocks and overall risk appetite, limiting CAD losses.
  • There were 220,000 new jobless claims last week, slightly below the 222,000 expected and just below the four-week average of 220,7500 claims.
  • Crude oil markets have flattened on Thursday, but remain a far cry from recent bids, providing little support for the Canadian dollar.
  • Markets will focus on Friday’s upcoming US Nonfarm Payrolls report for November, expected to rise from 150,000 in October to 180,000 MoM.

Price of the Canadian Dollar today

Below is the percentage change of the Canadian Dollar (CAD) against the currencies listed today. The Canadian dollar was the strongest currency against the US dollar.

USD EUR GBP CAD AUD JPY NZD CHF
USD -0.35% -0.24% 0.05% -0.72% -2.17% -0.48% 0.02%
EUR 0.35% 0.09% 0.40% -0.37% -1.81% -0.12% 0.37%
GBP 0.26% -0.08% 0.32% -0.46% -1.85% -0.21% 0.28%
CAD -0.03% -0.40% -0.32% -0.78% -2.22% -0.54% -0.04%
AUD 0.73% 0.38% 0.45% 0.75% -1.43% 0.24% 0.72%
JPY 2.13% 1.74% 1.88% 2.17% 1.41% 1.68% 2.15%
NZD 0.49% 0.15% 0.24% 0.54% -0.23% -1.67% 0.51%
CHF -0.01% -0.36% -0.28% 0.04% -0.73% -2.18% -0.49%

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 in the box will represent EUR (base)/JPY (quote).

Technical Analysis: Canadian Dollar Setback on Thursday, USD/CAD Tests 1.3600

USD/CAD retreated towards the 1.3600 area during trading on Thursday, and the pair is encountering some bid resistance at a technical level. A bounce in the CAD seems unlikely with the intraday action finding support at the 200-hour SMA near 1.3570.

In the daily candles, USD/CAD is being pushed higher following a rejection of the 200-day SMA just above the 1.3500 area. In the short term, the 50-day SMA tests 1.3700, which could attract upward bids.

A sustained bearish rejection from 1.3600 will provide downward momentum back towards 1.3500, where sellers will want to regroup efforts to try and break the week’s low near 1.3480.

USD/CAD Hourly Chart

USD/CAD Daily Chart

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 main export product, 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 are market confidence, that is, whether investors bet on riskier assets (risk-on) or look for safe assets (risk-off), with the 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.

How do Bank of Canada decisions affect 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 usually 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.

How does the price of oil affect 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 lead to a higher probability of a positive trade balance, which also supports 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. Higher inflation often leads central banks to raise interest rates, attracting more capital inflows from global 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?

The published macroeconomic data measures the health of the economy and may 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 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

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