Canadian Dollar vs US Dollar, British Pound and Euro – Overview:
- bastard Supported by the Bank of Canada’s tightening interest rate.
- US dollars / Canadian dollars Attempts to break a major side pattern.
- How crosses British Pounds / Canadian Dollars And US dollars / Canadian dollars look?
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The Canadian dollar appears poised to resume its rally against some of its peers, thanks to the Bank of Canada remaining hawkish and potentially building a base in oil prices.
The Bank of Canada raised its key overnight rate by 25 basis points to a 22-year high of 5.0% last week and left the door open for further tightening as it does not expect inflation to return to its 2% target before mid-2025. Headline inflation slowed to 2.8% y/y in June from last year’s high of more than 8%.
However, the BoC’s preferred measures of core inflation, CPI average, and CPI contraction hold steady at 3.8% and 3.9%, respectively. Markets are pricing in the prospect of a rate hike of around 20% at their next meeting in September.
The Canadian dollar has lagged the recent rally in commodity currencies but has room to run. Besides, the Canadian Bank of Canada and the Canadian dollar were also supported by building a potential base in oil prices as the OPEC+ production cuts started to spill over. As a result, speculative positions in the Canadian dollar turned long for the first time since late 2022. Moreover, the technical charts agree.
USD/CAD daily chart
Chart by Manish Gradi using TradingView
USD/CAD: Imminent bearish breach
The slight bounce in USD/CAD seems to be losing steam, as shown in the previous update. See “Q3 Trade Summit: Canadian Dollar May Rise Further Against US Dollar in Q3,” posted on July 5. Last week’s decline below the early July low opened the door to further weakness in USD/CAD. This is because the pair’s decline in June below the vital converging support around 1.3220-1.3320 initially opened the gates towards the psychological level of 1.3000, and it is likely to head towards the August low at 1.2725.
GBP/CAD daily chart
Chart by Manish Gradi using TradingView
GBP/CAD: A strong barrier ahead
GBP/CAD’s rally succumbed to resistance at the early 2022 high of 1.7375, just above key resistance on the 200-week moving average. Moreover, a pullback below immediate support at 1.7140 May high indicates fading short-term bullish pressure. Odds increase towards June low at 1.6620.
EUR/CAD daily chart
Chart created using TradingView
EUR/CAD: Weak momentum on the rebound
EUR/CAD’s rebound from June lacked strength – the MACD barely budged even as the crossover approached an 18-month high of 1.5100. The lack of bullish momentum is a sign that the multi-month rally is showing signs of fatigue. This comes after a failed attempt to rise beyond a challenging hurdle of 1.5100 late 2021 high. A pullback towards June low of 1.4280 cannot be ruled out.
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– Posted by Manish Grady, Strategist for DailyFX.com
Connect with Jaradi and follow her on Twitter: @JaradiManish
