- The USD/CAD struggles to register a significant recovery and remains close to a minimum of several weeks.
- The US fiscal concerns limit the USD rally after NFPs and act as a wind against the currency pair.
- Petroleum prices preserve weekly profits and underpin the CAD, contributing to limit the torque.
The USD/Cort ranged in a narrow range during Friday’s Asian session and remains close to a minimum of almost three weeks reached the day before. Cash prices are currently negotiated around the area of ​​1,3575, almost unchanged in the day in mixed signals.
The US Dollar (USD) struggles to capitalize on the strong upward movement of the previous day that followed the publication of a Non -Agricultural Payroll (NFP) report of the US stretherds. It is estimated that the legislation will add 3.4 billion dollars to the national debt and will exploit the federal deficit. This, in turn, limits the recent recovery of the USD from a minimum of several years and acts as a wind against the USD/CAD torque.
Meanwhile, crude oil prices struggle to attract buyers amid expectations that OPEC+ will announce an increase of 411,000 barrels per day in production for August. However, the black liquid manages to preserve weekly profits and sign it to the CAD linked to raw materials, contributing to limit the USD/CAD pair. That said, the persistent uncertainties related to trade could stop the operators of opening aggressive directional bets for the weekend, and the relatively low negotiation volumes due to the Festivity of the US Independence Day.
From a technical perspective, the formation of a descending channel points to a well -established bearish trend in the short term. This, together with negative oscillators, suggests that the path of lower resistance for the USD/CAD torque is down. However, the bearish operators could expect a sustained breakdown below the trend channel support before opening new positions and positioning themselves for an extension of the fall observed during the last two weeks.
Canadian dollar – frequent questions
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, 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, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure 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 CAD direction. A strong economy is good for the Canadian dollar. Not only attracts 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
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.
