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CFD Trading Rate US Dollar vs Canadian Dollar (USDCAD)

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  • 12.07.2024 13:41
    USD/CAD remains sideways above 1.3600 even though US PPI rise strongly
    • USD/CAD remains in a tight range above 1.3600 despite US PPI turning out hotter than expected.
    • Market speculation for Fed rate cuts in September remains firm.
    • The weak Canadian job market boosts prospects of more rate cuts by the BoC.

    The USD/CAD pair doesn’t move much from its current range above 1.3600 in Friday’s American session even though the United States (US) Bureau of Labor Statistics (BLS) has reported that the producer inflation rose at a faster-than-expected pace in June.

    The Producer Price Index (PPI) report showed that the core factory-gate inflation grew at a robust pace of 3.0% than the estimates of 2.5% and the prior release of 2.6%, upwardly revised from 2.3%. Also, the underlying inflation rose strongly by 0.4% from the consensus of 0.2% and the former reading of 0.3%, upwardly revised from its unchanged position.

    Hotter-than-expected producer inflation has raised doubts over strong market speculation for the Federal Reserve (Fed) to begin reducing interest rates from the September meeting, which were prompted by softer-than-projected consumer inflation and easing labor market strength.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has declined further to near 104.00. The opening of the S&P 500 on a positive note indicates a higher risk appetite of market participants. 10-year US Treasury yields surrender their intraday gains and fall back to near 4.20%.

    Meanwhile, the Canadian Dollar remains on the backfoot amid expectations that the Bank of Canada (BoC) will cut interest rates again. Market speculation for back-to-back rate cuts by the BoC rose due to weak Canadian labor market conditions. The BoC started reducing its key borrowing rate from the June meeting after maintaining a restrictive interest rate framework for more than two years.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 12.07.2024 08:09
    USD/CAD falls toward 1.3600 due to higher Oil prices
    • USD/CAD edges lower as the commodity-linked CAD finds support from higher Oil prices.
    • WTI price appreciates as cooling US inflation data has raised speculation of a Fed rate cut in September.
    • Chicago Fed President Austan Goolsbee stated that the US economy appears to be on track to achieve 2% inflation.

    USD/CAD retraces its gains from the previous session, trading around 1.3620 during the European hours on Friday. The commodity-linked Canadian Dollar (CAD) finds support from the higher crude Oil prices, given the fact Canada is the biggest Oil exporter to the United States (US).

    West Texas Intermediate (WTI) Oil price extends its winning streak for the third session, trading around $82.20 per barrel at the time of writing. Crude Oil prices received support as softer-than-expected US Consumer Price Index (CPI) data for June has raised speculation of a potential Federal Reserve (Fed) rate cut in September. Lower borrowing costs support the US economy, the largest Oil consumer in the world, which in turn boosts crude Oil demand.

    In June, the US Consumer Price Index (CPI) decreased by 0.1% month-over-month, reaching its lowest level in over three years. The core CPI, which excludes volatile food and energy prices, rose by 3.3% year-over-year, compared to May's increase of 3.4%, matching expectations. Meanwhile, the core CPI increased by 0.1% MoM, below the expected and prior rise of 0.2%.

    On policy front, Federal Reserve Bank of Chicago President Austan Goolsbee said on Thursday that the US economy appears to be on track to achieve 2% inflation. This suggests Goolsbee is gaining confidence that the time for cutting interest rates may soon be approaching. He also stated "My view is, this is what the path to 2% looks like," according to Reuters.

    In Canada, the Unemployment Rate increased to 6.4% in June, the highest since January 2022, with the economy losing 1,400 jobs. This has heightened the likelihood of the Bank of Canada (BoC) implementing further interest rate cuts to boost economic growth. Consequently, the yield on Canadian 10-year government bond dropped to about 3.4%, reflecting dovish expectations from the BoC.

    Traders await the Michigan Consumer Sentiment Index and US Producer Price Index (PPI) data, due on Friday, to gain further impetus on the US economy. On Loonie’s front, May’s Building Permits (MoM) will be eyed.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

  • 11.07.2024 23:56
    USD/CAD trades with bearish bias below 1.3650, investors await US PPI data
    • USD/CAD weakens around 1.3630 in Friday’s early Asian session. 
    • The softer US June inflation readings increased Fed rate cut bets. 
    • The recovery of crude oil prices might cap the pair’s upside. 

    The USD/CAD pair trades with mild losses near 1.3630 after bouncing off the two-month lows around 1.3588 during the early Asian session on Friday. The pair edges lower after the softer-than-expected US inflation readings in June have fueled the expectation of a Federal Reserve (Fed) rate cut in September, which weighs on the Greenback. 

    US inflation, as measured by the Consumer Price Index (CPI), declined 0.1% MoM in June, the lowest level in more than three years, the Labor Department reported Thursday. The headline CPI increased 3.0% on a yearly basis in June, compared to a rise of 3.3% in May, below the market consensus of 3.1%. The core CPI, which excludes volatile food and energy prices, rose 3.3% YoY in June compared to May's increase and expectation of 3.4%

    In response to the data, investors in the fed funds futures market increased their bets that the US Fed would lower rates starting in September. According to CME Group’s FedWatch Tool, markets are now pricing in nearly 89% odds of a September Fed meeting rate cut, up from 73% on Wednesday. 

    Furthermore, the US weekly Initial Jobless Claims for the week ending July 6 increased by 222,000, compared to the previous week's 239,000, the lowest level since June 1. This figure came in better than the expectations of 236,000. 

    On the Loonie front, Canada’s Unemployment Rate rose to 6.4% and the economy lost 1,400 jobs in June, prompting a higher probability that the Bank of Canada (BoC) would cut further interest rates. The weaker Canada’s June labour market data might undermine the Canadian Dollar (CAD) and create a tailwind for USD/CAD. However, the rebound of crude oil prices might help limit the CAD’s losses, as Canada is the major crude oil exporter to the United States.

     

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 11.07.2024 07:37
    USD/CAD Price Analysis: Trades in tight range above 1.3600 ahead of US Inflation
    • USD/CAD stays sideways near 1.3600 with US inflation in focus.
    • The core CPI is estimated to have grown steadily by 3.4% on monthly as well as annual basis.
    • Easing Canadian labor market conditions boost BoC’s rate-cut prospects.

    The USD/CAD pair consolidates in a tight range above the round-level support of 1.3600 in Thursday’s European session. The Loonie asset turns sideways as investors await the United States (US) consumer inflation data for June, which will be published at 12:30 GMT.

    The US Consumer Price Index (CPI) report is expected to show that annual and monthly core inflation, which excludes volatile food and energy prices, grew steadily by 3.4% and 0.2%, respectively. Annual headline inflation is estimated to have decelerated to 3.1% from 3.3% in May.

    The inflation data will exhibit the strength in the market speculation for the Federal Reserve (Fed) to begin reducing interest rates from the September meeting. Ahead of the US inflation data, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, remains on the backfoot around 105.00.

    Meanwhile, the Canadian Dollar is under pressure amid growing speculation that the Bank of Canada (BoE) will deliver subsequent rate cuts. Deteriorating Canadian labor market conditions have boosted expectations of more rate cuts by the BoE.

    USD/CAD exhibits a sheer volatility contraction, trading in a limited range of 1.3600-1.3780 for more than two months. A volatility contraction suggests lower volume and small ticks, while a breakout in the same results in wider ticks and heavy volume.

    The asset trades below the 20-day Exponential Moving Average (EMA) near 1.3663, suggesting that the near-term outlook is bearish.

    The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among market participants.

    A decisive breakdown below May 3 low around 1.3600 will expose the asset to April 9 low around 1.3547 and the psychological support of 1.3500.

    On the flip side, a fresh buying opportunity would emerge if the asset breaks above June 11 high near 1.3800. This would drive the asset towards April 17 high at 1.3838, followed by 1 November 2023 high at 1.3900.

    USD/CAD daily chart

    Economic Indicator

    Consumer Price Index (YoY)

    Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

    Read more.

    Next release: Thu Jul 11, 2024 12:30

    Frequency: Monthly

    Consensus: 3.1%

    Previous: 3.3%

    Source: US Bureau of Labor Statistics

    The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

     

  • 10.07.2024 22:58
    USD/CAD remains on the defensive near 1.3600 ahead of US CPI data
    • USD/CAD trades on a weaker note around 1.3615 in Thursday’s early Asian session. 
    • Fed’s Powell said the central bank will cut rates when ready, regardless of the political calendar. 
    • A rise in Canada's Unemployment Rate has prompted the BoC to consider cutting interest rates in July, ING analyst said. 

    The USD/CAD pair remains under selling pressure near 1.3615 during the early Asian session on Thursday. Meanwhile, the USD Index (DXY) extends its consolidation above the 105.00 hurdle as traders await the key US inflation report. The US Consumer Price Index (CPI) data for June is due on Thursday, along with the weekly Initial Jobless Claims and speeches by the Federal Reserve’s (Fed) Raphael Bostic

    Fed Chair Jerome Powell responded to questions before the House Financial Services Committee on Wednesday. Powell said that the central bank will make interest rate decisions based on the data, the incoming data, the evolving outlook, and the balance of risks, and not in consideration of political factors. 

    He further stated that the Fed won't wait until US inflation slows to its 2% target before it cuts interest rates. The probability of the Fed leaving the policy rate unchanged in September stood at nearly 25% following this event, according to the CME FedWatch Tool. 

    On the Loonie front, the decline of crude oil prices might undermine the commodity-linked Canadian Dollar (CAD) as Canada is the major crude oil exporter to the United States.

    Furthermore, ING’s FX analyst Francesco Pesole said that a rise in the Canadian Unemployment rate has put a July Bank of Canada (BoC) rate cut on the table. The financial markets have priced in 16 basis points (bps)  of easing for July. 

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.


     

     

  • 10.07.2024 14:35
    USD/CAD: Cannot exclude a July BoC cut – ING

    The latest hiring contraction and rise in unemployment to 6.2% in Canada has put a July Bank of Canada rate cut on the table, ING’s FX analyst Francesco Pesole notes.

    CAD to continue to underperform

    “Our latest forecast saw Bank of Canada cuts in September, October and December. But the latest hiring contraction and rise in unemployment to 6.2% has put a July cut on the table.”

    “Markets are pricing in 16bp of easing for July: we think the deciding factor will be the June inflation report on 16 July, after May’s figures came in a bit higher than expected.”

    “Still, market pricing for total BoC easing in 2024 looks conservative: 55bp versus our call for 75bp. There is therefore ample room for dovish repricing along the way. We think CAD will continue to underperform other commodity currencies due the domestic story and its lower sensitivity to a decline in USD rates.”

  • 10.07.2024 12:03
    USD/CAD Price Analysis: Potentially beginning new leg higher within range
    • USD/CAD is probably beginning a new up leg within a range. 
    • The MACD has crossed over its signal line adding further credence to the bullish thesis. 
    • A mini Bull Flag may also have formed at the range lows.
       

    USD/CAD has been trading in a range since the start of May. At first it looked like the pair had formed a Symmetrical Triangle pattern but the pattern failed to evolve. 

    The pair’s lack of directionality means the short-term trend is probably now sideways. Given the “trend is your friend” the odds favor a continuation of USD/CAD’s sideways oscillations.

    USD/CAD 4-hour Chart 

    More recently USD/CAD has found support near the range’s floor at roughly 1.3589 and bounced. As it is in a sideways trend it will probably start moving up towards the range ceiling now at roughly 1.3788. 

    The Moving Average Convergence Divergence (MACD) indicator crossed above its red signal line on July 5 after the initial bounce. This is a bullish sign and suggests the next leg higher within the range is about to unfold. Note how in the past, crossovers of the MACD and signal line coincided with price turns within the range.

    USD/CAD has been trading in a mini-sideways consolidation (light blue shaded area on chart above) since July 5. This might be the “flag square” part of a small Bull Flag Pattern. Such a pattern promises further upside if price breaks out of the top of the rectangular consolidation phase. The target for the follow-through higher after the breakout is situated at 1.3764, the length of the initial bounce or “flag pole” extrapolated higher.

     

     

  • 10.07.2024 07:48
    USD/CAD holds ground around 1.3650 due to lower Oil prices, hawkish Fed
    • The commodity-linked CAD struggles as Crude Oil price continues its losing streak for the fourth successive day.
    • WTI price extends its losses due to the diminished impact of Hurricane Beryl.
    • Fed Chair Powell stated, "First-quarter data did not support the greater confidence in the inflation path."

    USD/CAD holds its gains, trading around 1.3640 during the early European hours on Wednesday. The weakening of the commodity-linked Canadian Dollar (CAD) could be attributed to lower crude Oil prices, given the fact that Canada is the biggest Oil exporter to the United States (US).

    West Texas Intermediate (WTI) Oil price trades around $80.30 per barrel at the time of writing. This drop in Oil prices is attributed to the diminished impact of Hurricane Beryl. The storm affected a major Oil-producing region in Texas but caused less damage than initially expected by the markets.

    Oil and gas companies resumed some operations on Tuesday. Several ports reopened, and most producers and facilities began ramping up output. However, some facilities sustained damage, and power had not yet been fully restored, according to Reuters.

    Additionally, Oil prices may face challenges due to weak consumer demand in China, the world's top crude importer. China's Consumer Price Index (CPI) data showed an annual increase of 0.2% in June, down from a 0.3% rise in May, falling short of the market's forecast of a 0.4% increase. Monthly, inflation declined by 0.2% in June, compared to the previous and expected decline of 0.1%.

    Moreover, Federal Reserve Chairman Jerome Powell's testimony before the US Congress on Tuesday. Powell acknowledged improving inflation data but reiterated the Fed's cautious stance. The higher rate would negatively impact the economy of the United States, the largest Oil consumer.

    Fed Chair Powell stated, "More good data would strengthen our confidence in inflation." He also noted that "first-quarter data did not support the greater confidence in the inflation path that the Fed needs to cut rates."

    Traders anticipate the second semi-annual testimony by Fed Chair Jerome Powell and speeches by the Fed’s Michelle Bowman and Austan Goolsbee on Wednesday. Additionally, attention will be on the US Consumer Price Index (CPI) data, set to be released on Thursday.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 09.07.2024 23:05
    USD/CAD remains confined in familiar range above 1.3600, eyes on Powell, Fedspeak
    • USD/CAD consolidates near 1.3635 in Wednesday’s early Asian session.
    • Fed’s Powell said ”more good data" could open the door to rate cuts. 
    • The weaker Canadian employment data has spurred the BoC rate cuts expectation. 

    The USD/CAD pair remains capped within a narrow trading range around 1.3635 during the early Asian session on Wednesday. Meanwhile, the USD Index (DXY) consolidates its gains past the 105.00 hurdle as traders await the second semi-annual testimony by Federal Reserve (Fed) Chair Jerome Powell, along with speeches by the Fed’sMichelle Bowman and Austan Goolsbee.

    On Tuesday, Fed’s Powell delivered the Semi-Annual Monetary Policy Report and responded to questions before the Senate Banking Committee on the first day of his Congressional testimony. Powell said that holding interest rates too high for too long could affect economic growth. He further stated that "more good data" could open the door to interest rate cuts as recent data indicated that the labor market and inflation are continuing to cool. 

    The US central bank has kept the Fed's federal fund rate in a range of 5.25%-5.50% since July of 2023, the highest in 23 years after inflation hit its highest level since the early 1980s. According to data from the CME FedWatch Tool, investors are now pricing in 74% odds of a Fed rate cut in September, up from 71% last Friday. However, the Federal Open Market Committee (FOMC) members at their June meeting indicated just one cut this year. The expectation of a Fed rate cut might exert some selling pressure on the US Dollar (USD) in the near term. 

    On the other hand, the weaker-than-expected Canadian labour market data has triggered speculation about the Bank of Canada (BoC) rate cut. The country’s Unemployment Rate rose to 6.4% in June from 6.2% in May. A National Bank economist said that the Unemployment Rate in Canada might hit or exceed 7% this year if the BoC doesn’t make interest rate cuts “sooner than later.”

    Elsewhere, crude oil prices decline for the third consecutive day as hurricane-driven supply concerns dwindled and geopolitical jitters remained subdued. Nonetheless, the rebound of oil prices might lift the commodity-linked Canadian Dollar (CAD) as Canada is the major crude oil exporter to the United States.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 09.07.2024 12:01
    USD/CAD edges lower with the focus on events south of the border
    • USD/CAD edges lower as traders await the testimony of Fed Chair Jerome Powell to the US Senate on Tuesday. 
    • The pair is dominated by the US Dollar as the Canadian data schedule remains uneventful till next week. 
    • Markets keep betting on the Federal Reserve cutting US interest rates in September, a potential negative for USD/CAD.  

    USD/CAD edges higher on Tuesday, to trade in the 1.3640s, as it continues its broadly range-bound consolidative market mode of the last three-month period. Most of the emphasis is on the US Dollar side of the pair as traders await Federal Reserve (Fed) Chairman Jerome Powell’s testimony to the Senate Banking Committee, whilst Canada sees no scheduled macroeconomic events until Building Permits are released on Friday. 

    Fed Chair Powell is expected to chart a conservative line in his testimony to the Senate on Tuesday, more-or-less repeating the message he made when he spoke in at the central-bankers get together in Sintra. There he eased his stance from strictly data-dependent to admitting that there were now welcome signs inflation was falling, but that more evidence was required to establish that it was significant and sustainable. As such, it is expected he will keep markets guessing as to the timing of the Fed’s next policy move. 

    Markets are less ambivalent. The market-based probabilities of the Fed cutting interest rates by 0.25% to an upper band of 5.25% at the September Fed meeting have steadily risen over the past two weeks amid a negative compounding effect from a stream of not-quite-good-enough data releases. Most recently, ISM Services PMI data for June fell into contraction territory, and labor market data for the same month showed the Unemployment Rate rising to 4.1% – the third monthly increase in a row. Although NonFarm Payrolls beat expectations of 190K to register 206K new jobs added, the previous month was revised drastically down. 

    Inflation data has also generally come out on the cool side. In the NFP report Average Hourly Earnings remained unchanged from May and met expectations exactly. Prior to that the Fed’s preferred gauge of inflation, the Personal Consumption Expenditures (PCE) Price Index, edged down to 2.6% for both headline and core inflation in May. Before that Consumer Price Index data for May showed prices falling more than expected to 3.3% and core inflation also undershooting to 3.4%. Although both PCE and CPI are still above the Fed’s 2.0% target they are drifting in the right direction. 

    As far as Canadian data goes, its labor market seems to be suffering more than the US, as revealed in the Canadian version of the NFP report also released on Friday. This showed the Unemployment Rate rising to 6.4%, surpassing forecasts of 6.3% and marking its highest level since January 2022. Canadian payrolls were even worse, showing a 1.4K fall when economists had expected a 22.5K rise. The stresses in the labor market have been blamed on still-high interest rates in Canada stymying companies ability to access credit. This has led to further calls that the Bank of Canada (BoC) should cut interest rates again, after they reduced the policy rate by 0.25% to 4.75% in June – the first change in interest rates since July 2023.

    Since lower interest rates or their expectation is generally negative for a currency all eyes will be on Powell’s comments and when the Fed will make its first move. Otherwise the Canadian Dollar looks more vulnerable as the BoC weighs further rate cuts to stimulate its sagging labor market.  


     

  • 09.07.2024 06:44
    USD/CAD Price Analysis: The potential support level is located near 1.3600
    • USD/CAD trades on a weaker note near 1.3635 in Tuesday’s early European session. 
    • The pair maintains a negative stance below the 100-period EMA, with the bearish RSI momentum indicator. 
    • The initial contention level will emerge near 1.3600; the first upside barrier is seen at 1.3650.

    The USD/CAD pair remains on the defensive around 1.3635 during the early European session on Tuesday. The Greenback weakens on the back of the potential September rate cut from the US Federal Reserve (Fed) after employment data last week indicated a cooling US labor market. 

    According to the 4-hour chart, USD/CAD keeps the bearish vibe unchanged below the key 100-period Exponential, Moving Average (EMA). Furthermore, the downward momentum is supported by the Relative Strength Index (RSI), which stands near in the bearish zone near 45.70. This indicates that the path of least resistance level is to the downside.    

    The potential support level for the pair will emerge near 1.3600, portraying the confluence of the lower limit of the Bollinger Band and the psychological level. A breach of this level will see a drop to 1.3556, a low of April 10. The additional upside filter to watch is 1.3515, a low of April 1. 

    On the other hand, the immediate resistance level is seen at 1.3650, the upper boundary of the Bollinger Band. A decisive break above this level will pave the way to 1.3672, the 100-period EMA. Any follow-through buying could see a rally to 1.3712, a high of June 27. 

    USD/CAD 4-hour chart

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 08.07.2024 22:56
    USD/CAD oscillates in trading range above 1.3600, investors await Powell’s testimony
    • USD/CAD remains capped within a trading range near 1.3635 in Tuesday’s early Asian session. 
    • Loosening US labor market triggered the Fed rate cut expectation this year. 
    • Lower crude oil prices weigh on the Loonie. 

    The USD/CAD pair oscillates in a narrow trading range around 1.3635 during the early Asian session on Tuesday. Traders prefer to wait on the sidelines ahead of Powell’s semi-annual testimonies and key US data. Additionally, the Federal Reserve’s (Fed) Michael Barr and Michelle Bowman are set to speak later on Tuesday.

    Meanwhile, the USD Index (DXY) hovers around the 105.00 barrier despite lower US bond yields. The recent US employment report for June hinted that the labour market in the United States is cooling sharply, triggering the expectation that the US Fed could lower its borrowing costs sooner than expected this year. This, in turn, is likely to weigh on the Greenback. Investors have priced in nearly 76% odds of a Fed rate cut in September, up from 71% last Friday, according to the CME FedWatch tool. 

    On the CAD’s front, weakening Canadian employment on Friday raised expectations for rate cuts from the Bank of Canada (BoC). Canada's Unemployment Rate rose to 6.4% in June from 6.2% in May, according to Statistics Canada.  

    Meanwhile, crude oil prices edge lower in response to growing peace talks in the Middle East, exerting some selling pressure on the commodity-linked Canadian Dollar (CAD) as Canada is the major crude oil exporter to the United States.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 08.07.2024 11:52
    USD/CAD steadies above 1.3600 as prospects of BoC’s subsequent rate cuts improve
    • USD/CAD stabilizes above 1.3600 as investors expect that the BoC will deliver back-to-back rate cuts.
    • Loosening US labor market strength has boosted Fed rate-cut bets.
    • Investors await the US CPI data for June.

    The USD/CAD pair holds ground above the crucial support of 1.3600 in Monday’s European session. The Loonie asset trades in a tight range inside Friday’s range, while the outlook remains uncertain as easing United States (US) labor market strength has increased investors’ confidence for early rate cuts by the Federal Reserve (Fed).

    S&P 500 futures have recovered losses witnessed in early European trading hours, portraying a recovery in investors’ risk appetite. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to three-week low near 104.85. 10-year US Treasury yields edge higher after falling to near weekly low around 4.3%.

    The US NFP report for June showed that the Unemployment rate rose unexpectedly to 4.1%. Also, Average Hourly Earnings, a measure that gauge wage growth, decelerated expectedly on monthly and an annual basis. This has eases risks of inflation remaining persistent.

    Next trigger for the US Dollar will be the US Consumer Price Index (CPI) data for June, which will be published on Thursday. The US CPI report is expected to grow steadily on year by 3.4%. The scenario in which the core inflation grew steadily or at a higher pace would dampen market speculation for Fed rate cuts in September. On the contrary, higher-than-expected inflation reading will strengthen the same.

    On the Canadian Dollar (CAD) front, market expectations for subsequent rate cuts by the Bank of Canada (BoC) have improved due to turmoil in labor market. Canada’s Unemployment Rate rose at a faster pace to 6.4% from the estimates of 6.3% and the prior release of 6.2%. Also, the labor market faced an unexpected drawdown as 1.4K employees were laid-off.

    Economic Indicator

    Unemployment Rate

    The Unemployment Rate, released by Statistics Canada, is the number of unemployed workers divided by the total civilian labor force as a percentage. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease of the figure is seen as bullish for the Canadian Dollar (CAD), while an increase is seen as bearish.

    Read more.

    Last release: Fri Jul 05, 2024 12:30

    Frequency: Monthly

    Actual: 6.4%

    Consensus: 6.3%

    Previous: 6.2%

    Source: Statistics Canada

     

  • 08.07.2024 04:13
    USD/CAD remains below 1.3650 due to dovish sentiment surrounding the Fed
    • USD/CAD loses ground as US Dollar faces challenges after weaker-than-expected US employment data released on Friday.
    • According to CME's FedWatch Tool, the probability of a Fed rate cut in September has increased to 70.7%, up from 64.1% just a week ago.
    • Canada's 10-year government bond yield fell below 3.53%, indicating an accommodative stance by the BoC.

    USD/CAD traces back its recent gains, trading around 1.3630 during the Asian session on Monday. This decline is attributed to the lower US Dollar (USD) following weaker-than-expected US employment growth data released on Friday. This has increased the probability of the Federal Reserve’s (Fed) interest rate cuts sooner rather than later.

    US Nonfarm Payrolls (NFP) increased by 206,000 in June, following a rise of 218,000 in May. This figure surpassed the market expectation of 190,000. The US Unemployment Rate edged up to 4.1% in June from 4.0% in May. Meanwhile, Average Hourly Earnings decreased to 3.9% year-over-year in June from the previous reading of 4.1%, aligning with market expectations.

    According to the CME's FedWatch Tool, rate markets are currently pricing in a 70.7% probability of a rate cut in September, up from 64.1% just a week earlier. The Greenback faced challenges as the Fed Chair Jerome Powell said last week that the central bank is getting back on the disinflationary path, per Reuters.

    However, minutes from the Federal Reserve's June monetary policy meeting indicated that Fed officials were adopting a cautious "wait-and-see" approach. Some participants highlighted the Committee's commitment to a data-dependent approach.

    In Canada, the Unemployment Rate rose to 6.4% in June, surpassing the expected 6.3% and reaching its highest level since January 2022. This increase highlights concerns from the Bank of Canada (BoC) that high interest rates are putting significant pressure on the job market, prompting calls for potential rate cuts to support economic recovery. Additionally, Canada's 10-year government bond yield dropped below 3.53%, reflecting expectations of a more accommodative stance from the central bank.

    The commodity-linked Canadian Dollar (CAD) may see limited gains due to falling crude Oil prices. Canada, a major crude Oil exporter to the United States (US), is observing West Texas Intermediate (WTI) oil trading around $82.40 per barrel at the time of writing. Geopolitical tensions in the Middle East eased with prospects of a ceasefire in Gaza, contributing to the decline in Oil prices.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 05.07.2024 13:48
    USD/CAD gyrates above 1.3600 after US/Canada Employment release
    • USD/CAD turns volatile after the release of the US/Canada Employment report for June.
    • US wage growth momentum slowed expectedly while employment numbers beat estimates.
    • Canada’s labor market witnessed drawdown while Average Hourly Earnings accelerated.

    The USD/CAD pair exhibits wild moves above the round-level support of 1.3600 in Friday’s American session. The Loonie asset turns volatile after the release of the United States/Canada Employment data for June.

    The US Nonfarm Payrolls (NFP) report showed that labor demand remained stronger-than-expected. Number of workers hired were 206K, higher than the estimates of 190K but lower than the prior release of 272K. The Unemployment Rate rose to 4.1% from the estimates and the prior release of 4.0%.

    Meanwhile, Average Hourly Earnings slowed expectedly. Annually, the wage growth momentum decelerated to 3.9% from the prior release of 4.1%. This has eased fears of price pressures remaining persistent. It would also boost expectations of early rate cuts by the Federal Reserve (Fed). Currently, financial markets expect that the Fed will start reducing interest rates from the September meeting.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, remains on the backfoot near 105.00. 10-year US Treasury yields fall sharply to near 4.30%.

    In Canada, the labor market faced an unexpected drawdown as 1.4K employees were laid-off. Economists expected the labor market to have witnessed addition of 22.5K payrolls lower than May’s reading of 26.7K. The Unemployment Rate rose at a faster pace to 6.4% from the estimates of 6.3% and the prior release of 6.2%.

    Average Hourly Earnings grew strongly by 5.6% from the former reading of 5.2%. This would diminish expectations of subsequent rate cuts by the Bank of Canada (BoC). The BoC delivered its first rate-cut decision in June after maintaining a restrictive interest rate framework for more than four years.

    Economic Indicator

    Average Hourly Wages (YoY)

    The Average Hourly Wages, released by Statistics Canada, measures the increase in the salaries earned by permanent employees in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending, which stimulates economic growth. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

    Read more.

    Last release: Fri Jul 05, 2024 12:30

    Frequency: Monthly

    Actual: 5.6%

    Consensus: -

    Previous: 5.2%

    Source: Statistics Canada

     

  • 05.07.2024 07:41
    USD/CAD falls toward 1.3600 ahead of employment data
    • USD/CAD depreciates as softer US data raising speculations of the Fed reducing rates in 2024.
    • US Nonfarm Payrolls are forecasted to show an increase of 190,000 new jobs, down from the previous reading of 272,000.
    • Canada's Net Change in Employment is expected to drop to 22.5K in June, from the prior 26.7K reading.

    USD/CAD extends its losing streak for the fourth successive session, trading around 1.3610 during the early European hours on Friday. This decline is attributed the weaker US Dollar (USD), which could be attributed to softer data from the United States (US) raising speculations of the Federal Reserve (Fed) reducing interest rates in 2024.

    On Wednesday, US ISM Services PMI fell sharply to 48.8 in June, marking the steepest decline since April 2020. This figure was well below market expectations of 52.5, following a reading of 53.8 in May. The ADP Employment report showed that US private businesses added 150,000 workers to their payrolls in June, the lowest increase in five months. This figure fell short of the expected 160,000 and was below the downwardly revised 157,000 in May.

    Traders await the US employment reports on Friday, which are expected to show a slowdown in employment growth in June. The US Nonfarm Payrolls (NFP) are expected to show an increase of 190,000 new jobs, down from the previous reading of 272,000. US Average Hourly Earnings are anticipated to moderate slightly, projected to decrease to 3.9% year-over-year from the prior 4.1% reading.

    On the CAD’s front, the modest decline in crude Oil price might limit the upside of the commodity-linked Canadian Dollar (CAD), as Canada is the major crude Oil exporter to the United States. West Texas Intermediate (WTI) Oil price trades around $83.50 per barrel at the time of writing.

    Recent data showed that the Organization of Petroleum Exporting Countries (OPEC) increased production in June for the second consecutive month. This indicates a potential easing of tight Oil markets in the coming months, exerting downward pressure on crude Oil prices.

    Additionally, the latest Canadian composite PMI of 47.5 signaled a contraction in private-sector output and a reduction in cost pressures, suggesting that the Bank of Canada (BoC) may lower borrowing costs. This could put pressure on the Canadian dollar and support the USD/CAD pair.

    On Friday, traders await the Canadian Net Change in Employment, which is expected to drop to 22.5K in June, from the previous reading of 26.7K. Meanwhile, the Canadian Unemployment Rate is projected to tick higher to 6.3% from 6.2%.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 05.07.2024 01:27
    USD/CAD remains under selling pressure near 1.3600 ahead of US/Canadian employment data
    • USD/CAD trades in negative territory for the fourth consecutive day near 1.3605 in Friday’s early Asian session. 
    • The recent discouraging US economic data have fuelled the chance of a Fed September rate cut, weighing the US Dollar. 
    • Canadian Net Change in Employment is expected to decline to 22.5K versus 26.7K prior. 

    The USD/CAD pair trades on a negative note around 1.3605 during the early Asian session on Friday. The downtick of the pair is backed by the weaker US Dollar (USD) boardly. The release of US and Canadian employment reports will be the highlights on Friday. 

    Market consensus forecasts the US employment growth slowed in June, with a 190,000 increase in Nonfarm Payrolls (NFP). The Unemployment Rate is expected to remain steady at 4.0%, partially due to a forecast decline in the participation rate last month. 

    The recent softer US PCE inflation and weaker Services PMI have raised the chance of a Federal Reserve (Fed) September rate cut, with the markets pricing a 70% odds leading into the NFP release of that occurring. The markets also see a second rate cut in December, which is priced in around an 80% probability. This, in turn, exerts some selling pressure on the Greenback. 

    On the Loonie front, the Canadian Net Change in Employment is expected to drop to 22.5K from the previous reading of 26.7K. The Canadian Unemployment Rate is projected to tick higher to 6.3% from 6.2%. Meanwhile, the modest decline in crude oil price might weigh on the commodity-linked Canadian Dollar (CAD), as Canada is the major crude oil exporter to the United States.

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 04.07.2024 10:08
    USD/CAD Price Analysis: Seems vulnerable near 1.3600 ahead of US/Canada Employment
    • USD/CAD sees more downside below 1.3600 as the US Dollar remains on the backfoot.
    • Easing US labor market strength and rising concerns over economic outlook have weighed on the US Dollar.
    • Next major trigger for the Canadian Dollar and the US Dollar will be the Employment data from their respective regions.

    The USD/CAD pair appears to be fragile near monthly low around 1.3620 in Thursday’s European session. The Loonie asset weakens as the US Dollar (USD) faces significant selling pressure after the United States (US) ADP Employment Change data for June showed that the strength in the labor market eases and the ISM Services PMI, in the same period, indicated that the economy outlook has become uncertain.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, declines to near 105.30.

    The ADP Employment report showed that labor demand in the private sector unexpectedly decline. Number of individuals hired in private sector were 150K, lower than expectations of 160K and the prior release of 157K. The ISM Services PMI, a measure to activities in service sector that accounts for two-third of the economy, recorded at lowest in four years.

    Going forward, the US Dollar and the Canadian Dollar (CAD) will dance to the tunes of the official Employment data for June, which will be published on Friday.

    USD/CAD extends its losing streak for the third trading session on Thursday. The Loonie asset falls into the bearish trajectory after a breakdown of the Symmetrical Triangle formation on a daily timeframe. The above-mentioned chart pattern indicates a sharp volatility contraction and a downside break in the same results in wider bearish ticks and heavy selling volume.

    The major shifts below the 50-day Exponential Moving Average near 1.3676, suggesting that the near-term trend is bearish.

    The 14-day Relative Strength Index (RSI) has declined to near 40.00. A decisive break below 60.00 levels would push momentum on the downside.

    A decisive breakdown below May 3 low around 1.3600 will expose the asset to April 9 low around 1.3547 and the psychological support of 1.3500.

    On the flip side, a fresh buying opportunity would emerge if the asset breaks above June 11 high near 1.3800. This would drive the asset towards April 17 high at 1.3838, followed by 1 November 2023 high at 1.3900.

    USD/CAD daily chart

    Economic Indicator

    Net Change in Employment

    The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

    Read more.

    Next release: Fri Jul 05, 2024 12:30

    Frequency: Monthly

    Consensus: 22.5K

    Previous: 26.7K

    Source: Statistics Canada

    Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.

     

  • 03.07.2024 23:04
    USD/CAD remains on the defensive below 1.3650 on weaker US data, softer US Dollar
    • USD/CAD remains under selling pressure near 1.3640 in Thursday’s early Asian session. 
    • The US service sector fell into contraction territory in June.
    • Higher crude oil prices continue to support the commodity-linked Loonie. 

    The USD/CAD pair trades on a softer note around 1.3640 during the early Asian session on Thursday. The softer Greenback after the weaker-than-expected US Services Purchasing Managers Index (PMI) for June has dragged the pair lower. Meanwhile, the USD Index (DXY) accelerates its decline to 105.30 and US yields decline across the board amid the Independence Day holiday on Thursday.

    Business activity in the US service sector fell into contraction territory in June. The US ISM Services PMI dropped to 48.8 in June from 53.8 in May, missing the market expectation of 52.5 by a wide margin. In response to the weaker data, the US Dollar (USD) attracts some sellers broadly. 

    According to the Federal Open Market Committee (FOMC) meeting on June 11–12,  Federal Reserve (Fed) officials emphasized the data-dependent approach and refrained from committing to interest rate cuts until further observation. Additionally, some policymakers noted the importance of patience before considering rate cuts, while several others stated that it’s necessary to hike again if inflation were to rebound. 

    On the Loonie front, the rise of crude oil prices continues to underpin the commodity-linked Canadian Dollar (CAD), as Canada is the major crude oil exporter to the United States. On the downside, manufacturing activity in Canada remained weak in June, with the Canadian S&P Global Manufacturing PMI standing at 49.3 in June. This figure came in weaker than the market estimation of 50.2, the 14th straight month of contraction, and the longest run in records dating back to October 2010.  

     

    Canadian Dollar FAQs

    The key factors driving 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, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     

  • 03.07.2024 14:10
    USD/CAD tumbles below 1.3650 on weak US private labor demand and Services PMI
    • USD/CAD declines to near 1.3620 as the US Dollar weakens after poor US data.
    • US private labor demand remained slowed and the Services PMI contracted in June.
    • Investors await the US/Canada official Employment data for June.

    The USD/CAD pair falls sharply to near 1.3650 in Wednesday’s American session. The Loonie asset weakens as the US Dollar (USD) faces an intense sell-off after the United States (US) ADP Employment report showed that labor growth in the private sector surprisingly slowed in June and the ISM Services PMI report showed that activities in the service sector contracted significantly.

    According to the report, private employers hired 150K job-seekers, missed estimates of 160K and the prior release of 157K, upwardly revised from 152K. This has deepened uncertainty over the labor market outlook. However, investors await the US Nonfarm Payrolls (NFP) report for June, which will be published on Friday. The US NFP report will provide clarity about the current status of the labor market.

    Meanwhile, the Services PMI declined to 48.8 from expectations of 52.5 and the prior release of 53.8. A figure below the 50.0 threshold is itself considered as contraction in service activities. Other sub-components, such as the Prices Paid and New Orders Index, were weaker than their former readings.

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has slumped to near 105.30.

    On the Loonie front, investors await the Canadian Employment report for June, which will be published on Friday. The labor market report is expected to show that the Unemployment Rate increased to 6.3% from the prior release of 6.2%. Canadian employers hired 22.5K workers, which were lower than the former reading of 26.7K.

    Strong Employment numbers would ease expectations of subsequent rate cuts by the Bank of Canada (BoC), while soft figures will boost them.

    Economic Indicator

    ADP Employment Change

    The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

    Read more.

    Last release: Wed Jul 03, 2024 12:15

    Frequency: Monthly

    Actual: 150K

    Consensus: 160K

    Previous: 152K

    Source: ADP Research Institute

    Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

     

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