The Canadian dollar has been on struggling week after the consecutive economic reports and growing expectations of a March Fed rate hike. Similarly, the currency failed to recover after the Bank of Canada maintained its overnight rate despite the recent gains in employment and consumption growth in Canada. Will the loonie continue to wobble?
As of 10:17 UTC, USD/CAD was up 0.13 percent to trade at 1.3409 after closing at 1.33863 on Thursday. The pair opened at 1.33929 with a session high of 1.34120 and session low 1.33926. The tight trading range could keep the uptrend until the end of the session.
Currently, the pair is trading above its 50-day moving average of 1.3558 and 20-day SMA of 1.33861. Supporting the upward momentum of the pair, the green candle touched the upper band of the Bollinger band. Considering these factors, USD/CAD may settle at 1.34100 or 1.34200 before the closing bell.
Meanwhile, here’s the stand of the Canadian dollar against a basket of currencies as of 10:26 UTC.
AUD/CAD 1.01279 (up)
CAD/CHF 0.75537 (down)
CAD/JPY 85.171 (down)
GBP/CAD 1.64377 (up)
The likelihood of a rate hike this month keeps the interest of the investors in the greenback amid the recent downtrend. After the opening bell, the greenback slightly slid against a basket of currencies, however, the recent statement of the Federal Governors strengthened the bets of the market players on the US currency, making the losses limited.
As seen on the chart below, USD/CAD started the week at 1.31108 levels and has climbed at 1.33918 levels as of 09:20 UTC. The uptrend was even supported by the Bank's unchanged monetary rate at the mid of the week. Market analysts were expecting a rate increase from the central bank of Canada and that could have changed the rhythm for the loonie.
In the report released by the central bank of Canada, it was clearly stated that the recent data on the global and Canadian economies have been consistent with the Bank’s projection of improving growth, as set out in the January Monetary Policy Report. However, the export sector was still struggling to find stability while the Canadian dollar and bond yields remained near levels. The pointed increase in inflation was merely due to the surge in oil prices in the recent months.
A sustainable economic growth is an essential factor to boost the confidence of the Central Bank to finally impose a rate hike. In line with this, Canada is probably away from that tone as the Bank of Canada remains reluctant in changing its rates. The Bank might be waiting for a firm recovery of Canadian export amid the new trade policies under the administration of Trump.
As a commodity currency, the loonie is exposed to volatility as oil prices move lower in the face of rising U.S. stockpiles amid the output curb compliance of the OPEC and non-OPEC members. Market participants are currently expecting the Baker Hughes US oil rig count report later today, which can provide probable direction of oil prices in the following days.
In the meantime, the Canadian dollar might stay in the losing streak as the strength of the dollar and lack of support from the central bank continue to wind down the currency.
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