Currency Analyst since 2010

USD/CAD: bad times for loonie

USD/CAD is trading in the 1.0660 area after it spiked to 1.0707 yesterday, the highest level since the middle of 2010.

The Bank of Canada kept his main interest rate unchanged at 1% and said the risks of inflation staying below target “appear to be greater”. The central bank’s tone hasn’t changed much since October meeting when it switched from a soft tightening to a neutral mood.  

Analysts at Credit Agricole point out that USD/CAD is driven by the difference in monetary policies of the US and Canadian central banks. US 10-year yield rose by 23 bps over the past month while the Canadian 10-year added only 15 bps. Canada’s disinflationary concerns may continue supporting the pair. Another bearish factor for CAD is a drop in prices of commodities such as gold and oil.

Still, CA regards the situation in Canada as much better than in other G10 economies and recommend waiting for higher levels in EUR/CAD and AUD/CAD to enter shorts. Societe Generale is sure that USD/CAD will break 1.0700 in the next wave of acceleration.   

Support lies at 1.0650, 1.0605 and 1.0560. Resistance is at 1.0700, 1.0745 and 1.0780.

There will be important data from Canada as well today: building permits at 13:30 GMT and Ivey PMI at 15:00 GMT. Analysts also forecast that US Q3 GDP growth reading will be raised.    


Chart. Daily USD/CAD

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