Currency Analyst since 2010

CAD: fundamental analysis

USD/CAD rose to the 6-month high on Friday. Canadian dollar fell versus the US dollar as Canada has unexpectedly posted trade deficit, the largest since Nov. 2013, which supported the Bank of Canada’s cautious outlook on the economy. In September the central bank said that there’s an equal possibility of a rate hike and a rate cut and that it’s waiting for signs of a sustained export recovery – as a result, worse trade balance increases the risk of a rate cut. Note that the recent economic data from Canada were also far from inspiring: the number of employed declined in August, while the GDP in July was flat.

At the same time, Canadian currency strengthened versus its other major counterparts (AUD, NZD), after data showed that the unemployment rate in the US, Canada’s largest trading partner, fell to a 6-year low in September.

Today Canada will release Ivey PMI at 14:00 GMT (forecast is positive) and tomorrow Canada will release building permits. USD/CAD is trading below March high (1.1278) and the top of the monthly Ichimoku Cloud and near 50% retracement of the 2009-2011 decline). The medium term outlook is bullish, but resistance is strong. The pair will correct today, especially if Canadian data don’t disappoint this time. Support lies at 1.1175, 1.1130 and 1.1100.


Chart. H4 USD/CAD

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