Canadian Dollar Under Pressure vs the British Pound and US Dollar

The Canadian dollar (CAD) trades in tepid fashion having reached its lowest level against USD since July 2009 amidst declining crude oil prices and the dovish message from the BoC keep the CAD under pressure against a host of global currencies.

The British pound to Canadian dollar exchange rate (GBP/CAD) has taken full advantage of the faltering CAD and surged 0.66 pct on a day-on-day basis to reach 1.8256. At the time of writing we see the pair consolidating at these levels.

The euro was not one to be left out of the whipping either and has notched gains of 0.63 pct and hit 1.4270. At the time of writing the pair is at 1.4318.

Be advised all quoted figures will be altered at discretion by your bank when delivering or transferring you foreign exchange.

Ensure you utilise an independent FX provider to ensure you get as close to the market rate as possible, thereby saving you up to 5% more currency in some instances.

Oil Prices Hammer CAD Lower

We have warned here on many occassions in recent months that the oil price is the one key risk to the Canadian dollar's outlook.

News that Saudi Arabia would trims its US oil price in order to increase market share in America, has weakened the energy sector, while increasing selling pressure on commodity currencies such as CAD and NOK.

Commenting on the recent fall in oil is Peter Rosenstreich at Swissquote Forex Services:

"While Saudi Arabia has increase the price of crude oil in Asia and Europe, the price to selling into the US was cut. Global oversupply due to new sources and weaker demand has put pressure on oil prices for the last 4-months.

"Yet even that extended move didn’t not cushion crude prices from last night announcement.

"The sell-off in WTI was sharp, hitting a three-year low at 75.84. In addition, technical trading models sell signals were triggered on the break of $80, causing deeper position liquidations.

"The sell-off in oil has kept CAD under pressure. USDCAD preparing to retested October high at 1.1385."

Bank of Canada Offers No Help to the Canadian Dollar

It's not just crude oil prices that have been undermining the performance of the Canadian currency.

Shaun Osborne at TD Securities tells us of a sheepish Bank of Canada helping push the CAD's valuations lower:

"Governor Poloz reaffirmed the broadly dovish impression of the Bank of Canada’s current policy position by reiterating in his speech that there is still 'material slack' in the Canadian economy and that it may take up to two years to use up the excess capacity; he stressed that continued monetary stimulus would be required as the economy absorbs excess capacity and that stimulus may be required even after that point if “headwinds” remained."

"All in, the Bank is clearly in no rush to raise interest rates, it would appear. 

BoC dovishness is reflected in US-Canada spreads, where the recent narrowing in yield differentials has reversed in the short/belly of the curve (5-year spreads widened to +10bps yesterday from –3bps in mid October.

"The headwinds for the CAD have been compounded by the renewed slide in oil prices, despite headlines yesterday suggesting that Saudi producers were pushing prices up again for Asian buyers (Saudi producers also announced significant price cuts for US buyers)."

Technical Outlook for GBP vs CAD

We note that sterling has pushed convincingly above the 1.82 resistance point against CAD.

This is significant as it shows the GBP could be finally reasserting itself against the Canadian unit.

GBP/CAD’s choppy range trade has been a feature of markets in recent times.

"We continue to think the broader trend (and September rebound) favours more GBP gains—eventually," says Osborne.

Technical Forecast for the US dollar to Canadian Dollar

Swissquote Research tell foreign exchange traders to watch the following levels in USD/CAD:

"USD/CAD continues to rise and is now challenging its resistance at 1.1385. Hourly supports can be found at 1.1340 (intraday low) and 1.1259 (see also the rising trendline).

"Another resistance is given by the psychological threshold at 1.1500. In the longer term, the technical structure looks like a rounding bottom whose minimum upside potential is at 1.1725. The recent move above the resistance at 1.1279 (20/03/2014 high) confirms this bullish outlook.

"Strong supports can be found at 1.1072 (02/10/2014 low) and 1.0811 (29/08/2014 low)."