The Canadian dollar remains firmly in control, nevertheless those with outstanding CAD payments should be aware of where this strength would most likely faulter.
- GBP to CAD: "We still rather look at minor GBP gains as a selling opportunity"
- EUR to CAD: "Bearish pressure is accentuated by strengthening trend strength signals"
- USD to CAD: "We think there is limited scope only for the USD to rebound"
There's been quite a bit of volatility in the Canadian dollar this week and the currency be in play tomorrow with key data scheduled for release.
After 4 straight days of gains, CAD retreated versus the dollar today as oil prices retraced.
Retail sales and consumer prices are due on Friday.
The sharp drop in wholesale sales (largest decline since 2008) signals potential weakness for retail sales.
Spending soared in January and a cutback would not be unusual while consumer prices on the other hand should increase as oil prices recover.
We began to see signs of stronger price pressures in the manufacturing sector with the price component of the IVEY PMI index extending higher and now we could see prices move higher on the consumer level as well.
"Its worth noting that the 2 year U.S.-Canadian yield spread to starting to base and if data tomorrow's reports are weak and oil prices fall further, we could see the makings of a bottom in USD/CAD," says analyst Kathy Lien at BK Asset Management.
The Canadian dollar hovers near its highest level against the greenback since July, now up over 15% since the start of the year.
Oil’s impressive rally and the Fed’s more dovish stance have helped CAD recover from a 13-year low in January.
"Still, any pullback in crude and any shift in the Fed’s tone will leave the CAD and its commodity counterparts vulnerable to a pullback," says a note on the currency from Commonwealth Foreign Exchange.
Canadian lender Scotiabank have meanwhile released their latest Canadian Dollar pair forecasts, we take a look at the charts and report on what they predict
"The US dollar to Canadian dollar, “tilted lower from the upper 1.29 area,” and “did not look back,” remark’s Scotia’s top technician Shaun Osborne.
The fall sustained the procession of peaks and troughs down reinforcing the down-trend.
With all indicators pointing down, Osborne concludes that the pair is likely to go lower and dollar strength will serve only to provide selling opportunities:
“With trend strength oscillators (DMI) aligned on the short, medium and longer-term studies, we think there is limited scope only for the USD to rebound; scope for USD strength is now likely limited to 1.2750/1.28 near-term. We still favour fading short-term USD gains.”
“The down-trend in GBP/CAD looks rather more equivocal than in other pairs,” comments analyst Shaun Osborne.
The pound has strengthened and intraday studies are looking a little flat.
Overall, however, the broader down-trend remains intact and only a break above 1.8375 would improve the picture short-term:
“We still rather think the push under 1.85 suggests “overshoot” risks towards 1.78/1.80 remain alive”
A bearish outlook still dominates, however:
“We still rather look at minor GBP gains as a selling opportunity.”
After seeing gains rebuffed at 1.46 EUR/CAD has fallen to support at the 1.44 lows.
On balance more downside is expected as action on the intraday charts such as the hourly and 4-hourly remains week:
“Bearish pressure is accentuated by strengthening trend strength signals on the daily DMI signal. Longer-term studies are shifting to negative as well but the signal remains relatively weak.”
Overall Osborne expects more downside eventually as indicators turn bearish for the euro:
“The alignment of the trend strength signals suggests strengthening headwinds for the EUR from here and more pressure on the 1.4395/00 support point. A break lower would target a drop towards 1.36.”