The Canadian dollar sold off yesterday and remains weak this morning. The currency continues to track the fortunes of crude oil. As West Texas Intermediate prices fall, the Canadian dollar is falling accordingly. Given the country's reliance on exports of crude oil, the fortunes of the currency are fairly well correlated with commodity prices. We have downgraded our outlook on the Canadian dollar in the short-term to neutral as crude oil prices fall. Looking at the charts, the currency is trading within normal conditions and looks neither overbought nor oversold.
The USD/CAD exchange rate is currently above 1.2750. The euro is up sharply against the Canadian dollar. EUR/CAD is currently above 1.4930. Lastly, the pound is flat against the Canadian dollar, with GBP/CAD trading below 1.6730.
This is a fairly light week for Canadian economic releases. On Friday, we’ll see CPI and Core CPI numbers. Last week, housing starts and new build permits beat expectations while the Bank of Canada remained “cautious” in its outlook for future rate hikes.
As the Canadian dollar rebounds thanks to strengthening crude oil prices, we are now neutral on the currency in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.