Canadian Dollar vs Pound Sterling, US Dollar and Euro: CAD Bears Should Be Very Cautious At Current Levels
- Written by: Gary Howes
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The US dollar / Canadian dollar exchange rate has sunk below the key 1.1000 level, GBP/CAD reasserts rally.
The Canadian dollar (CAD) is seeing strength on Wednesday; however losses are currently being witnessed against the British pound which has put on a barnstorming performance after markets factor in an interest rate rise in early 2015.
A look at the Canadian dollar exchange rate complex shows:
- The pound sterling to Canadian dollar exchange rate is 0.55 pct higher on a day-to-day basis at 1.8212.
- The euro to Canadian dollar exchange rate is 0.6 pct lower at 1.4927.
- The US dollar to Canadian dollar exchange rate is 0.13 pct lower at 1.0997.
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The US dollar / Canadian dollar exchange rate is sinking lower and is now below the key 1.1000 level. "Part of this trend lower reflects the fact that there is a distinct lack of upward or downward ‘signalling’ factors available for the CAD right now," says Stephen Gallo at BMO Capital.
On the other hand, after retail sales tomorrow, the next plausible big impetus for getting long of USDs is not really until the first week of March, when we receive key US data.
"This has left the USD somewhat vulnerable in the near-term, as the recent string of rather weak US data and ‘weather effects’ are discounted into the price," says Gallo.
BMO Capital say they are very cautious about being exposed to USDCAD topside exposure:
"We prefer to wait until levels closer to 1.095 emerge before looking to buy the pair. We’d also need a solid close back above the 21-day EMA (1.102) to even start considering a move back to 1.111/20 again.
"CAD bears should remain very cautious at current levels and wait for 1.095-1.096 to emerge first before seriously getting involved again. However, near-term opportunistic CAD shorts should look to raise that USDCAD bid range up towards 1.097/90 on a topside break of 1.102."
Currency market lacking direction
Apart from the pound sterling, there is something of a vacuum on global markets at present.
With no significant data to speak of and only Bullard (non-voter) on the Fed docket to speak this morning, markets might be in for a quiet time of it today.
Equity markets have had a very strong four-day run which may ease worries about a deeper shake out in stocks near-term. But we continue to feel it is too early to signal the all clear on risk assets at the moment.
Broadly, currency markets feel a little dazed and confused and loathe to trust the trends.
USDJPY had firmed but turned lower overnight despite stocks tracking higher. EURUSD looks heavy against resistance in the 1.3675/1.37800 zone—especially after this morning's drop—but could this really become a 10th week of consecutively alternating higher/lower weekly closes?
