Canadian Dollar fluctuates without clear direction in a quiet session
- Canadian Dollar is trading back and forth in pre-holiday trading session.
- A somewhat stronger US Dollar and BoC Rogers’ warnings about the country’s low productivity have weighed on the Loonie.
- The broader USD/CAD trend remains positive with 1.3615 capping bulls for now.
The Canadian Dollar (CAD) is trading back and forth, without a clear direction in Wednesday’s early US session, with the US Dollar having the upper hand in a thin trading session ahead of the Easter Holiday.
The Loonie opened the day on its back foot, following comments from the Bank Of Canada’s Senior Deputy Governor, Carolyn Rogers, complaining about the low productivity and poor levels of investment. The CAD, however, managed to pare some losses with Oil prices bouncing up during the European session and is now practically flat on the daily chart.
The US Energy Information Administration has reported an unexpected increase in Oil stockpiles during the week of March 22. These figures have capped the rebound on Crude prices and increased negative pressure on the Canadian Dollar.
In the absence of first-tier macroeconomic releases today, the focus is on Fed Governor Christopher Walles, who is expected to speak about monetary policy at the Economic Club of New York later on Wednesday.
Daily digest market movers: The USD/CAD treads water with investors awaiting US PCE Inflation data
- The Canadian Dollar is moving sideways with the US Dollar nudging higher in a quiet trading session.
- EIA Crude Oil stocks increased by 3,165 million Barrels in the week of March 22 against market expectations of a decline of above 1,275 million Barrels.
- Bank of Canada Senior Deputy Governor Rogers has warned that low productivity is going to be a hindrance to economic growth.
- On Tuesday, US macroeconomic releases showed mixed figures, with Durable Goods Orders increasing beyond expectations while the Conference Board’s Consumer Confidence contracted unexpectedly.
- According to the CME Group FedWatch Tool, markets are pricing more than a 60% chance that the Federal Reserve will start cutting rates in June, which is keeping USD bulls in check.
- The highlight of the week will be the US PCE Prices Index, the Fed’s inflation gauge of choice, which is expected to have accelerated at a 2.5% yearly pace in February from 2.4% in the previous month.
- The core PCE Prices Index is expected to have risen at a 2.8% yearly pace and 0.4% on the monthly rate in February, from 2.8% and 0.3%, respectively, in January.
Canadian Dollar price this week
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the weakest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.11% | -0.24% | -0.13% | -0.13% | 0.04% | -0.17% | 0.89% | |
| EUR | 0.12% | -0.13% | -0.01% | 0.00% | 0.15% | 0.00% | 1.00% | |
| GBP | 0.24% | 0.13% | 0.12% | 0.12% | 0.29% | 0.13% | 1.12% | |
| CAD | 0.15% | 0.04% | -0.09% | 0.03% | 0.14% | 0.03% | 1.03% | |
| AUD | 0.13% | -0.01% | -0.11% | 0.00% | 0.15% | -0.04% | 0.99% | |
| JPY | -0.05% | -0.15% | -0.19% | -0.15% | -0.16% | -0.19% | 0.85% | |
| NZD | 0.12% | 0.05% | -0.07% | 0.03% | 0.04% | 0.19% | 1.05% | |
| CHF | -0.87% | -1.01% | -1.13% | -1.01% | -1.00% | -0.93% | -1.00% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical analysis: The USD remains positive with 1.3615 resistance capping bulls for now
The USD/CAD keeps trading within an ascending channel, printing higher highs and higher lows, yet with price action limited below an important resistance area at 1.3615. The 50% Fibonacci retracement of the late 2023 sell-off and the trendline resistance are challenging bulls at this level.
On the downside, bearish attempts are limited at 1.3550 so far, with the next support areas at 1.3525 and the base of the channel at 1.3440.
USD/CAD 4-Hour Chart
All in all, the Canadian Dollar remains biased higher, but it seems to need an extra boost to break above recent highs. The US PCE Prices Index and Fed Powell’s comments are due on Good Friday, and the low trading volumes might boost the impact of these events.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.