Canadian Dollar twists as markets struggle to pick a direction
- The Canadian Dollar (CAD) backslid against the US Dollar on Monday.
- A moderate recovery has the CAD back into the green for the day.
- A Canadian holiday leaves CAD trading flows crimped.
The Canadian Dollar (CAD) tumbled against the Greenback early Monday before a mid-session recovery. The CAD is holding in positive territory against the US Dollar to kick off the new trading week, but market flows remain thin with Canadian markets shuttered for the August Civic Holiday.
CAD traders will be waiting in the wings with meaningful Canadian economic data slated for Friday with July’s updated labor figures. A smattering of mid-tier data from Canada is due throughout the midweek, but impact is set to be limited.
Daily digest market movers: CAD flows take a backseat amid US data fears
- US S&P Global Composite Purchasing Managers Index (PMI) figures in July eased to 54.3, missing the forecast hold at 55.0.
- Further downside misses added to fears of a US recession after last Friday’s miss in US Nonfarm Payrolls (NFP) sparked an extended risk-off decline across global markets.
- Market expectations for a Federal Reserve (Fed) rate cut in September are fully pinned to the ceiling.
- Despite wide misses in recent US data, Monday’s July ISM Services PMI rose to 51.1, beating the forecast 46.5.
- Later in the week, CAD traders will be looking for a recovery in Canada’s Net Change in Employment on Friday. June’s headline figure reported a net contraction of -1.4K.
Canadian Dollar PRICE Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.33% | 0.41% | -1.50% | -0.18% | 0.32% | 0.41% | -0.56% | |
| EUR | 0.33% | 0.66% | -1.33% | 0.03% | 0.67% | 0.64% | -0.33% | |
| GBP | -0.41% | -0.66% | -1.90% | -0.60% | 0.00% | -0.02% | -0.99% | |
| JPY | 1.50% | 1.33% | 1.90% | 1.39% | 1.81% | 1.97% | 0.99% | |
| CAD | 0.18% | -0.03% | 0.60% | -1.39% | 0.54% | 0.59% | -0.56% | |
| AUD | -0.32% | -0.67% | -0.01% | -1.81% | -0.54% | -0.03% | -0.98% | |
| NZD | -0.41% | -0.64% | 0.02% | -1.97% | -0.59% | 0.03% | -0.97% | |
| CHF | 0.56% | 0.33% | 0.99% | -0.99% | 0.56% | 0.98% | 0.97% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Canadian Dollar technical outlook: USD/CAD sets new 2024 high as Greenback tests high end
The Canadian Dollar (CAD) eased early Monday before recovering back into the green against the US Dollar. A Canadian market holiday leaves the CAD in a mixed stance to kick off the new trading week, up three-tenths of one percent against the Greenback but down around six-tenths of one percent against the Japanese Yen.
USD/CAD briefly rallied into a fresh high bid for 2024, falling just shy of 1.3950 before turning around and slumping back below 1.3850. The pair chalked in an outside candle on daily charts as price action gets frothy, but bidders are struggling to develop enough momentum to break the pair into an extended bull run.
USD/CAD daily 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.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
