The Canadian dollar is flat this morning, having strengthened for the last three days. The currency is getting closer to trading within normal conditions, although it continues to look oversold. This is particularly the case against the US dollar. Looking at economic data from last Friday, the trade balance was wider than expected, although changes in employment were higher than expected. While data and news from Canada has been mostly negative for the currency, the Canadian dollar is benefiting from higher crude oil prices. As we wrote in our earlier commentary, we expect the Canadian dollar to receive some support from higher crude prices as domestic developments weigh on the currency.
The USD/CAD exchange rate is currently above 1.2760. The euro is up slightly against the Canadian dollar today, after weakening on Friday. EUR/CAD is currently below 1.4820. Lastly, the pound is flat against the Canadian dollar, with GBP/CAD trading below 1.670.
Beyond a Bank of Canada speech and press event, this is a pretty light week for the Canadian dollar economic calendar. On Monday, we’ll see Ivey PMIs. On Wednesday, Governor Poloz will give a speech in Montreal followed by a press conference. We’ll also see October housing starts and build permits on Wednesday. Finally on Thursday, we’ll see the New Housing Price Index for September. Last week, trade balance figures and unemployment numbers missed expectations.
After rebounding from oversold conditions, we are upgrading the Canadian dollar to neutral. 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.