After a tough week, the Canadian dollar is currently taking a breather. The currency is slightly lower against global peers this morning, including the US dollar, euro and the pound. So far, the impact from higher crude prices last week has yet to push the Canadian dollar higher. Instead, the currency continues to sell-off as interest rate hike expectations continue to fall and the currency comes under pressure from NAFTA-related uncertainties. Last week, BoC Governor Poloz downplayed rate hike expectations in an interview by CBC. In stark contrast to his earlier rhetoric, he said that a "lot of things that have to come together" before another rate hike is on the table.
The USD/CAD exchange rate is currently above 1.2830. The euro is up against the Canadian dollar today, with EUR/CAD above 1.490. Lastly, the pound is also up against the Canadian dollar, with GBP/CAD trading above 1.6850.
This week has a few important events on the calendar. On Monday, we’ll see monthly GDP figures for August. On Wednesday, we’ll get Markit manufacturing PMIs. Finally, on Friday we’ll get the trade balance and unemployment numbers. Last week, the BoC maintained interest rates and expressed its “caution” regarding future rate hikes.
After falling sharply on lower rate hike expectations, we are downgrading the Canadian dollar to bearish. Looking at various technical indicators on a daily chart of the Canadian dollar, the currency is now looking oversold in the short-term.
After weakening in the latter half of October, we are now bearish on the medium-term outlook for the Canadian dollar. The currency is selling off on weak economic data and lower interest rate hike expectations. While the loonie was in overbought conditions in September, 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.