Canadian Dollar Forecasts Against the GBP, USD and EUR

Pound Sterling Live present technical outlook for the Canadian dollar against the British pound, euro and US dollar as we move towards February 2015.

Before we look at the predictions here are your Canadian dollar exchange rates to reference:

• The British pound to Canadian dollar exchange rate conversion: GBP/CAD is at 1.9247.
• The euro to Canadian dollar exchange rate conversion: EUR/CAD is at 1.4269.
• The US dollar to Canadian dollar exchange rate conversion: USD/CAD is at 1.2639.

P.S: The above quotes are taken from the global FX spot market. It must be noted that your bank will widen the spread on the above numbers when passing on their retail rate to customers. An independent FX provider will however guarantee to undercut the bank's offer thus delivering you more forex. Please see more on this here.

Pound Sterling to Canadian dollar forecast (GBP/CAD): Targetting 2.0 and Beyond

The pound has powered out of the sideways range that dominated trade in 2014. 

As the below image shows, leading into 2015 trade was subject to a sideways-orientated path, but the post-BoC boost has seen the currency pairing settle in a higher range.

We expect consolidation to extend around these levels before the next leg higher.

Shaun Osborne at TD Securities says he is forecasting levels at and above 2.0:

“A weekly close above 1.92 should solidify the longer-term bullish outlook we think is unfolding here (for a rally to 2.00/2.02).

“Note that trend momentum is nicely aligned across short, medium, long and ultra-long term time frames which allows for a high conviction bullish view point from our perspective. Expect limited weakness in the cross from here, especially if these gains are sustained through the close of the week.”

US dollar to Canadian dollar forecast (USD/CAD): A Test of 1.30 Ahead?

Giving his predictions for the US to Canadian dollar rate (USD/CAD), Osborne says:

"After a brief consolidation which coincided with the turn of the month, USDCAD’s underlying bull trend looks to be getting back on track.

“The USD found steady support in the high 1.23/low 1.24 area over the past week and this morning’s rebound to the mid 1.26 area, making minor new highs, suggests that the USD is making a push to retest the 1.28 zone.

“Note that short-term trend momentum studies are shifting positively again (1-hour and 6-hour studies), aligning nicely with the longer-term oscillator signals. This makes for a relatively high conviction bull call from our, technical, perspective.

“The longer-term patterns look positive for USDCAD too; above 1.26, the USD is breaking out of the broader consolidation pattern in place since the start of the month. The underlying trend here remains constructive and the positive, short-term signals are aligning with the bigger picture message here once again.

“A sustained push through 1.2595/00 should see USDCAD retest the 1.28 area again fairly easily; there is no meaningful resistance above the market at this point until the late January high. We continue to think that USDCAD can test 1.30+ in the next few weeks before seeing a broader consolidation perhaps in Q2.”

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Euro to Canadian dollar forecast (EUR/CAD): Risks are to the Downside

It has been a bad start to the new year for both the euro and the Canadian unit; as a result a sideways range has set in.

TD's Osborne says while the near-term momentum is higher the longer-term picture could see further rangebound trade:

"The cross may be able to retest the 1.44/1.45 resistance area in the next few days. But we are not convinced that the EUR can sustain that sort of rise.

"We still view the cross as largely range-bound overall and consider the broader directional risks to be geared to the downside (eventually, we look for a test towards 1.35).

"However, a clear and sustained push above 1.45 would warrant attention, especially if longer-term trend studies (currently neutral to bearish) start to move in alignment with the shorter-term oscillators."

Fundamental Themes: Will the US Dollar Strengthen Further?

As my colleague notes here, the CAD will continue to face oil price related headwinds in the year ahead.

The softer oil price presents CAD's greatest challenge when it comes to trading against the USD.

“The lower-for-longer level of oil prices our energy team now expects prompted us to push up our USD-CAD forecasts to 1.26 by year-end (from 1.11) as the low level of oil prices will challenge Canada’s high-cost energy sector,” says Ian Gordon, FX Strategist at BofA.

“We would fade any CAD strength on the back of a cautious but balanced statement with oil prices implying USD-CAD will move to 1.28 by 3Q before falling to 1.26 into the year-end."