Canadian Dollar Dithering: CAD Exchange Rates Stuck, But Outlook Looks Vulnerable
- Written by: Gary Howes
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The Canadian Dollar is firmly stuck in consolidation mode at present. However, longer-term trajectories suggest further weakness lies ahead.
A look at the latest forex rates on Friday morning shows a remarkable lack of movement in the CAD family:
- The pound to Canadian dollar rate is 0.07 pct higher on a day-to-day basis having reached 1.8537.
- The euro to Canadian dollar is 0.11 pct higher at 1.5265.
- The US dollar to Canadian dollar exchange rate is 0.06 pct up at 1.1029.
Please keep in mind that all quotes here are mid-market. Your bank or payment provider will affix a spread to the rate at their own discretion.
Hence, your currency rate is often far off the mark. An independent provider will however actively seek to get you closer to the market rate, thus delivering up to 5% more currency in many cases. Please learn more here.
"Canada’s dollar continued to dither, though it eased away from Wednesday’s three-week low above C$1.1050. The loonie’s tight range was reinforced by mixed news this week on Canadian consumers. Data showed that they ramped up spending in February after dialing down in January, cementing expectations of sluggish first quarter growth," says a note from Western Union.
Despite the consolidation we note underlying technical studies confirm the medium- to long-term momentum is pitted against the CAD. As such, we expect any break-out to be at the CAD's disadvantage.
However, according to Stephen Gallo at BMO Capital, there remains decent demand for the Canadian currency at present:
"Greater two-way flow in the CAD still appears to be dominating the picture. EURCAD actually fell more than EURAUD in the wake of Draghi’s remarks (See below), and this suggests that there is some better underlying demand for the CAD from the lows on a relative basis. So, the bid tone in the CAD so far stands in contrast to the more offered tone on Wednesday. Nevertheless, the profile for USDCAD both technically and flow-wise remains ‘flattish’ for now."
Gallo says today's outlook for the USD to CAD should remain sideways in nature:
"Fairly quiet markets again and tight ranges remain in force, with key support at 1.0975/1.1000, and Reserve Manager sellers lurking above 1.1050. There is really not a great deal to say today as another sideways day looks very likely.
"Yesterday’s February Retail Sales numbers were on the face of it marginally better than expected, but there we some downward revisions to the January data so the market reaction was muted. Poloz speaks after the London close tonight."
Higher euro exchange rate could derail Eurozone economic recovery
Elsewhere in the currency markets it was stated by ECB President Mario Draghi that a higher euro exchange rate could derail the euro zone's economic recovery, and the ECB is open to broad-based purchases of assets if the outlook for consumer-price growth weakens too much.
The euro hardly moved in response, confirming markets are becoming immune to the ECB's apparently empty threats.
In a speech in Amsterdam, Draghi also said the ECB was working on ways to publish fuller accounts of its monthly discussions to beef up its communications, as other central bank such as the Federal Reserve and Bank of England do.
Markets: Apple, Facebook and Caterpillar drive sentiment
Turning to the broader market place, we see European stocks continue to trade higher, rebounding from yesterday’s losses following a number of positive results from Apple, Facebook and Caterpillar which beat analysts’ estimates.
Lee Mumford at Spreadex comments:
"US futures advanced ahead of the open, helped by technology shares and better than expected core durable goods orders. However, more Americans filed applications for unemployment benefits than forecast with the Easter holiday period likely to distort figures. Durable goods orders increased 2.6 percent, exceeding the 2.1 percent estimate, in the biggest gain since November.
"The euro gave up all of its early gains to trade 30 points lower against the dollar after European Central Bank president Mario Draghi indicated the risk of asset purchases to tackle deflation risks. Draghi comments showed the ECB could embark on broad-based asset buying plan if the euro zone inflation outlook worsens."
