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Canadian Dollar sees back-and-forth as Loonie hangs in the middle, markets focus on post-Fed Dollar drop

October 19, 2023| Forex Market


  • The Canadian Dollar spent Thursday mostly hung in place on the charts before catching a moderate bid.
  • Canada Raw Materials and Industrial Product Price beat expectations, but the market is focused elsewhere.
  • Fed Chair Jerome Powell notes that policy is restrictive, but more could be needed, dropping the USD.

The Canadian Dollar (CAD) is catching a late break against the US Dollar (USD) as the Greenback recedes, walking back some of yesterday’s declines that saw the Loonie drop to its lowest prices against the USD since the start of October.

Canada Industrial Product Prices and Raw Materials Price Index numbers for September both beat expectations, but the low-impact data did little to push the CAD into deeper moves with most of the market focused on Federal Reserve (Fed) Chairman Jerome Powell giving a speech to the Economic Club of New York.

Daily Digest Market Movers: Canadian Dollar tunnels sideways, sees some late moves in post-Powell bid

  • CAD mostly sticks to the day’s opening prices after testing the water in both directions.
  • Canadian economic data is strictly low-impact for the day, leaving traders focused on external drivers.
  • Speech from Fed Chair Powell saw an uptick in intraday volatility in USD-based FX pairs, but moves remain limited.
  • USD/CAD is having difficulty extending moves beyond 1.3700 as Loonie hangs on firm.
  • Crude Oil seeing minor uptick for Thursday, providing limited support for CAD.
  • Fed Chair Powell notes that “Inflation is still too high”, and the labor market remains tight, but shows signs of cooling off.
  • A softening USD bid is giving the CAD a chance to flip the day into the green.
  • CAD traders to look ahead to Canadian Retail Sales on Friday.
  • Jerome Powell says higher bond yields are producing tighter financial conditions

Technical Analysis: USD/CAD tests the water beneath 1.3700 post-Fed appearance

The USD/CAD saw a late break beneath 1.3700 with intraday action getting pushed into the 50-hour Simple Moving Average (SMA) near 1.3680, with the 50% retracement level of yesterday’s bottom-to-top moves sitting at that price. A thin rebound for the pair sees the USD/CAD sifting chart paper near 1.3720 as Thursday winds up trading.

Momentum on the daily candlesticks continues to find support from a rising trendline originating from 1.3100, in conjunction with a bullish-leaning 50-day SMA driving into 1.3575 and building a technical support floor to catch any downside extensions in the USD/CAD.

The pair continues to test the boundaries of a descending trendline drawn from 2020’s extreme peaks of 1.4668, and upside momentum could get constrained moving forward as the near-term uptrend runs against long-term resistance.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.

USD   -0.43% -0.02% 0.04% 0.03% 0.03% 0.04% -0.75%
EUR 0.42%   0.40% 0.46% 0.45% 0.45% 0.46% -0.34%
GBP 0.00% -0.42%   0.04% 0.05% 0.04% 0.05% -0.75%
CAD -0.04% -0.46% -0.04%   -0.03% 0.01% 0.01% -0.79%
AUD -0.03% -0.44% -0.04% 0.01%   0.00% 0.01% -0.78%
JPY -0.02% -0.48% -0.07% -0.01% 0.00%   0.00% -0.80%
NZD -0.02% -0.47% -0.08% -0.01% -0.01% -0.01%   -0.79%
CHF 0.75% 0.31% 0.74% 0.77% 0.76% 0.78% 0.79%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

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