Canadian Dollar shows strength

Alexander Kuptsikevich FxPro

The Canadian dollar reversed course to the upside a week and a half ago, and its strength is gaining momentum on the back of both a fresh wave of demand for commodities and robust economic data.

USDCAD is down 1.9% at 1.3430 since 8 September, when the pair reversed sharply lower as it approached 1.3700. Since 2003, the pair has only traded above 1.3700 for relatively short periods at the height of the crisis. The Canadian dollar became attractive for long-term buying as soon as the dust settled after the market crash during the oil collapse in 2015 and lockdowns in 2020.

Over this and the previous years, the Canadian dollar has held back from testing multi-year lows against the USD despite the latter's broad rally. On more than one occasion this year, we have seen the USDCAD sell-off intensify as it entered the 1.3600 area. September is no exception, as we see a similar decline in intensity to that seen in June.

The fundamental news for the Canadian dollar is the rise in oil prices and the fact that US producers are still clearly unable to close their operating deficits. Under these conditions, demand for Canadian crude, which is more expensive and "dirtier" to produce, is increasing. However, the 36% rise in crude oil prices since the end of June has convinced investors that Canadian exports will benefit from the recent price spike. Moreover, it could also be why the Bank of Canada shifted its policy towards more tightening after two months of CPI acceleration.

The latest data, which showed an acceleration in the annual pace to 4.0% from 2.8% in June and 3.3% in July, raised expectations for another rate hike by the Bank of Canada later this year.
USDCAD's failure on Tuesday also carries an important technical signal. The pair broke above both its 50- and 200-day moving averages during the day. The last time this happened was in early June; a sell-off for almost a month followed the signal.

As well as indicating the strength of the Canadian economy, the active decline in the USDCAD may also be a sign of growing risk appetite among North American investors. This could be an important leading signal for global markets.

Author

Alexander Kuptsikevich

FxPro

Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.