The Canadian Dollar (CAD) has shown some signs of firmness, although the increase is marginal. In comparison to the broad softness of the US Dollar (USD), the CAD is not performing as well as expected. Shaun Osborne, Scotiabank’s Chief FX Strategist, mentions that the Mexican Peso (MXN) is also losing ground amidst President Trump’s support for extensive tariffs in his Bloomberg interview. This indicates that the CAD is not standing out in the current market.
The recent release of Canadian Consumer Price Index (CPI) data has had a mixed effect on the CAD. Despite the mixed results, the focus is primarily on the fact that the central bank seems inclined towards easing rates. The lower than anticipated (-0.1% M/M) headline read from the CPI data is likely to draw attention from investors and policymakers. Moreover, the market has already priced in a 25bps rate cut on the 24th, which has caused US/Canada term spreads to widen slightly.
Analyzing the daily chart, it is evident that there was a shift from the intraday high yesterday to a more bearish ‘shooting star’ candle signal. This signifies a potential near-term peak for the USD against the CAD. Even though there have been modest intraday losses for the USD, they seem to have halted around the 1.3655/60 mark today. This suggests that the CAD might experience further fluctuations in the coming days.
Given the current scenario and market sentiment, it is crucial to monitor the CAD’s performance closely. With uncertainties surrounding global trade tensions and economic indicators, the CAD’s movements against the USD are likely to be influenced by multiple factors. Traders and investors should remain vigilant and adapt their strategies accordingly to navigate the evolving landscape of the currency markets.
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