The Canadian dollar has sold off for much of this week, despite climbing briefly on Tuesday. The currency initially fell after breaching overbought conditions a few weeks ago. Today, the bout has accelerated following comments from Bank of Canada Governor Poloz suggesting that future interest rate hikes are less certain in the future. The currency has fallen especially against the US dollar, which is benefiting from rising interest rate hike expectations and optimism towards Trump's tax reform plans.
USD/CAD rose more than one full cent yesterday, and today the pair is trading just above 1.25. After falling earlier in the week, EUR/CAD has strengthened after Poloz's comments. EUR/CAD is currently trading above 1.4650. The Canadian dollar has also lost ground against the pound, with GBP/CAD above 1.67.
This is a fairly light week for economic data from Canada. On Friday, Statistics Canada will announce month-on-month GDP growth for July. These figures will be watched closely considering the Bank of Canada's recent skittishness with regards to future interest rate hikes.
The loonie has weakened every week in the last three weeks of September. While the currency initially sold off without much of a catalyst, the bout has accelerated in recent weeks thanks to lower interest rate hike expectations following comments from the Bank of Canada. Thus we are downgrading the currency to bearish. While the loonie was in overbought conditions earlier in the month (as per our previous warning), the currency has since re-entered normal trading conditions. This is based on various technical indicators on a weekly chart of the Canadian dollar currency index.