CAD, spiking on Thursday, forcing it to score fresh eight-month highs against the USD. The CAD went on to explode more than half a percent, as it soared to its best levels since last October. At the same time, the USD/CAD pair is back around the 1.3600 area. The movement in currency values highlights the ongoing fluctuations in the foreign exchange market, heavily influenced by economic data and trading dynamics.
This is especially notable given Canada’s close relationship with the U.S. With the US its largest trading partner, this relationship has a strong effect on the value of the CAD. More recently, a few developments have increased demand for the Loonie. This spike is solely a product of the US economic climate’s effect on the Canadian dollar. The CAD’s ascent was timed with US PPI inflation data coming in softer than expected, taking a little wind out of the USD’s sails.
Influences on the Canadian Dollar
As ever, the strength of the Canadian Dollar is tightly connected to an array of overlapping considerations. Given that it’s an oil-exporting country, the CAD is always sensitive to shifts in oil prices. And as petroleum is still Canada’s largest export, changes in oil prices globally lead to rapid shifts in the value of the currency.
In recent weeks, surging oil prices have been responsible for much of the CAD’s strength. Investors would naturally favor the currencies of exporting nations when commodity prices soar, creating strong demand for the Loonie. This relationship between input costs and markets underscores the whopping impact external market conditions can have on Canada’s economy.
Additionally, the overall health of the US economy is a major factor in deciding whether the CAD is valuable. Since any indications of economic weakness in the US strengthen the Canadian Dollar by sending traders towards less risky investments, that is not good news. However, indicators — including the most recent jobs report released on Sept. The significance of this change has been a movement back towards the CAD, strengthening its standing in currency markets.
Current Economic Data Landscape
The Canadian economic calendar is otherwise quite thin for the rest of the month. The lack of economic figures released delimits the ability to forecast future movements of the CAD based exclusively on domestic data. Market participants have been looking ahead to important indicators coming out. They’re particularly zeroed in on Consumer Price Index (CPI) inflation data, due June 24th.
The next set of numbers will reveal whether inflationary pressures are building in Canada. They may affect the policy choices that the Bank of Canada (BoC) is willing to entertain. Earlier this month, the BoC took a pause from rate hikes, choosing to hold the overnight interest rate at 2.75%. This wait-and-see approach is indicative of their worry about the still-uncertain economic skies.
Analysts suggest that while current economic data may be thin, traders will closely monitor any shifts in consumer behavior or inflation trends that could impact monetary policy and consequently affect the Canadian Dollar’s trajectory.
Technical Analysis of USD/CAD Pair
The USD/CAD currency pair is currently trending in a strong downward channel. That drop has in fact been persistent ever since it faced those multi-decade high prints close to 1.4800 back in February. Recently, we have seen a reversal with the CAD strengthening against the USD. It’s seriously cutting, singing its way down to the paler side.
Traders note that the pair has steadfastly lost ground all of last week, marking a change in market sentiment. With technical indicators showing potential support levels around 1.3600, analysts remain cautious yet optimistic about the future performance of the CAD against the USD.
The currency pair is approaching dangerous territory. Out on the streets market participants are busy digesting economic releases and developments on the geopolitical front to inform their trading strategy as they look ahead.