- The Canadian dollar retreats on Wednesday amid deteriorating market sentiment on several fronts.
- US data is dampening risk appetite, along with deflation in crude oil supplies.
- The USD/CAD pair hits a new weekly high, while the US dollar bids higher.
The Canadian dollar (CAD) is experiencing widespread declines during the trading session on Wednesday, dragged down by crude oil sales and the decline of the US dollar (USD) in the markets following a series of US economic data that suggests that interest rates Interest rates will remain on the rise for longer than the markets anticipated at the beginning of the week.
CAD traders will be keeping an eye on Friday’s Canadian retail sales numbers, but the numbers are likely to be overshadowed by the US Purchasing Managers’ Index (PMI) numbers due shortly after.
US markets are also expected to see some volume on Wednesday, as investors pick up their order books in anticipation of Thursday’s Thanksgiving holiday.
Daily summary of market movements: Canadian dollar retreats amid falling crude oil and reversal of US dollar flows
- The CAD hits new lows for the week and retreats as market sentiment deteriorates.
- Crude oil markets are firmly lower for the week, with WTI falling below $75 per barrel.
- The Organization of the Petroleum Exporting Countries delayed a critical meeting on production cuts until next Thursday.
- Saudi Arabia is apparently dissatisfied with member countries’ unwillingness to meet reduced production quotas.
- The meeting, which will be attended by staff from the economic ministries of OPEC member countries, will focus on production cut plans.
- Record production from non-OPEC countries and concerns about demand from China raise expectations of further OPEC production cuts.
- Initial jobless claims in the US fell to a five-week low of 209,000, compared to forecasts of 225,000, highlighting that the employment situation in the US remains tense.
- The University of Michigan’s Consumer Inflation Expectations for November showed that U.S. consumers generally expect long-term inflation to remain above the Federal Reserve’s (Fed) 2% target, as consumers see an inflation of 3.2%.
- Inflation expectations tend to drive actual inflation, and elevated expectations mean the Fed was right to maintain a hawkish approach.
- Investors expecting an acceleration of rate cuts will be hurt by elevated price growth expectations.
Quote of the Canadian Dollar this week
The following table shows the percentage change of the Canadian Dollar (CAD) against the currencies listed this week. The Canadian Dollar was the strongest currency against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.33% | -0.07% | 0.11% | -0.34% | -0.21% | -0.29% | -0.10% | |
| EUR | -0.33% | -0.42% | -0.21% | -0.68% | -0.53% | -0.60% | -0.41% | |
| GBP | 0.08% | 0.41% | 0.20% | -0.25% | -0.11% | -0.19% | -0.01% | |
| CAD | -0.11% | 0.21% | -0.19% | -0.45% | -0.31% | -0.40% | -0.21% | |
| AUD | 0.33% | 0.66% | 0.27% | 0.45% | 0.13% | 0.05% | 0.27% | |
| JPY | 0.20% | 0.54% | -0.11% | 0.31% | -0.18% | -0.06% | 0.13% | |
| NZD | 0.28% | 0.61% | 0.21% | 0.40% | -0.05% | 0.08% | 0.18% | |
| CHF | 0.08% | 0.41% | 0.00% | 0.20% | -0.28% | -0.13% | -0.20% |
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 tests new low for the week, CAD traders eye recovery by midday
The Canadian Dollar (CAD) recorded further declines against the US Dollar (USD) on Wednesday, hitting a new low for the week and taking the USD/CAD pair to 1.3765.
Now the CAD is experiencing a slight recovery, dragging the USD/CAD back below 1.3750, but for the USD/CAD pair to continue falling intraday it will be necessary to overcome the resistance-turned-support of the 200 hourly SMA at 1.3740.
USD/CAD continues to trade above the ascending trend line from 1.3100, and the 50-day SMA provides technical support for any bearish move towards 1.3640.
USD/CAD Hourly Chart
USD/CAD Daily Chart
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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
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.
