After poor GDP figures, the Canadian dollar was looking very oversold in the short-term time frame. In the past two days, the currency has enjoyed a small rebound as a result, but continues to look oversold looking at various technical indicators on a daily chart. Looking at data, yesterday's Markit Manufacturing PMIs were lower versus the prior figures (54.3 vs. 55 prior). In news, Poloz spoke to lawmakers in Canada's Standing Committee on Finance yesterday regarding the Canadian dollar. He suggested that crude oil remains the biggest driver for the currency, although the Canadian dollar has done well this year thanks to rate hike expectations. Assuming interest rate stay constant in the near future, trading action in the loonie will follow crude oil prices.
The USD/CAD exchange rate is currently above 1.2840. The euro is down against the Canadian dollar today, after weakening yesterday. EUR/CAD is currently below 1.4950. Lastly, the pound is down against the Canadian dollar, with GBP/CAD trading below 1.704.
This week has a few important events on the calendar. Monthly GDP figures for August widely missed expectations (-0.1% vs. 0.1% expected). Markit manufacturing PMIs were lower versus the prior figures (54.3 vs. 55 prior). 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 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.