USD/CAD - US dollar to Canadian dollar

USD/CAD, or US dollar to Canadian dollar, is a major currency pair and is heavily traded in foreign exchange markets. Given that crude oil and refined petroleum products make up a significant portion of Canadian exports, USD/CAD tends to track global commodity prices. Similar to other commodity currency pairs, USD/CAD tends to depreciate during economic booms (CAD appreciates) while strengthening (CAD depreciates) during downturns. Looking at recent history, USD/CAD appreciated significantly during the 2008 financial crisis and following an emerging markets downturn in 2016. 

Short term outlook
Neutral
Medium term outlook
Bearish

US dollar daily update

The US dollar is currently trading at three year lows thanks to rising global risk appetite, strong growth outside the United States and a sharp run-up in the Japanese yen. As global equity markets rebound, safe haven flows into the US dollar are reversing. Looking at growth, current and forward-looking indicators suggest that growth in the Eurozone is on track to keep accelerating. While recent Japanese GDP growth was fairly disappointing, the yen strengthened following the announcement due to its safe haven characteristics. As USD/JPY is traded in significant volumes, a strengthening yen tends to weaken the US dollar in relative terms. Turning to US data, the US dollar has been fairly immune to positive economic data and rising US Treasury bond yields. Thanks to solid jobs and inflation figures, US Treasury yields are rising as the market bets on a faster pace of rate hikes. While the buck typically benefits from higher relative interest rates, this isn't the case today as markets expect monetary policy to tighten around the world. Later today, we will downgrade our short-term outlook to bearish, while our medium-term outlook remains bearish. 

USD/JPY is down sharply today and currently trading above 105.70. EUR/USD is up and trading above 1.2540. The pound is up, and GBP/USD is currently above 1.4140. 

Looking at US economic data this week, markets will be focused on retail sales and consumer price index figures. The monthly budget was worse than expectations. The YoY Consumer Price Index beat estimates (2.1% vs. 1.9% expected). MoM retail sales (ex-autos) were lower than estimates (0% vs. 0.4% expected). Initial jobless claims (230k) and the NAHB housing market index (72) met expectations. The Philly Fed manufacturing survey (25.8 vs. 21.1 expected) was ahead of expectations. MoM industrial production (-0.1% vs. 0.2% expected) and capacity utilization (77.5% vs. 78% expected) were slightly below consensus estimates. Later today, we’ll get housing starts and building permits. Last week, strong PMI numbers suggested a positive outlook for US growth.

Updated 

Canadian dollar daily update

The Canadian dollar is weakening today, as the global stock market rebound runs out of steam. In general, riskier assets such as stocks and commodities are doing poorly today, which is driving down the Canadian dollar. CAD is currently selling off against safe haven currencies such as the US dollar and the Japanese yen. The loonie is flat against the euro and the British pound. The US dollar is strengthening today, alongside most global government bonds. Safe haven assets such as the US dollar and government bonds typically rally when risk sentiment is weak. Turning to NAFTA discussions, top US and Mexican officials are cautiously optimistic that NAFTA can be renegotiated. The seventh round of negotiations will take place in Mexico City starting on February 25. As Mexican presidential elections are set to take place in July, there is a likelihood that talks will have to be postponed until later this year. Our short-term outlook on the Canadian dollar is neutral, while our medium-term outlook remains bullish.       

The USD/CAD exchange rate is currently above 1.2540. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5590. The pound is also flat against the Canadian dollar, with GBP/CAD trading above 1.7570.

This is a very light week for economic data from Canada. Manufacturing sales figures missed expectations by a significant degree (-0.3% vs. 0.2% expected). Last week, trade balances and changes in employment were below expectations. 

Updated 

US dollar to Canadian dollar Outlook

Short term outlook
Neutral

As the pair gains strength, we are now neutral on USD/CAD. Note that USD/CAD is currently trading within a normal range in the short-term. This is based on technical indicators on a daily chart. 

Medium term outlook
Bearish

As the Canadian dollar strengthens, we are now bearish on USD/CAD. The pair is trading under normal conditions. This is based on technical indicators on a weekly chart. 

Updated 

US dollar analysis

US dollar bear market: three reasons it can continue

The US dollar currency index, a measure of USD against six major peers, declined by 9.9% in 2017. Last month, the currency index continued declining and fell by another 3.3%. Given the speed of the recent decline, the US dollar started looking oversold according to technical indicators around mid-January. While we warned that the currency was looking oversold in several recent editions of our US …

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US dollar bear market continues: COT Report

Looking at this week’s Commitments of Traders Report, bullish extremes continue in long crude oil, the euro and the British pound. Net long positions have also grown this week for the two currencies and the commodity. The purpose of this report is to track how the consensus is positioned across various currencies and commodities. When net long positions become crowded in either direction, we fla…

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Tags: US dollar

As USD liquidity remains abundant, dollar bear market to continue

After President Trump unveiled his tax plans, many had predicted that the US dollar would strengthen thanks to the inflationary impact of reducing taxes by $1.5T. According to academic theory, an economy with limited slack and high growth is at the risk of overheating if fiscal stimulus is excessive. This is especially true as crude oil (a significant driver of inflation), continues to make multi…

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Canadian dollar analysis

Canadian dollar forecast: in vogue following better data in COT report

When will the Canadian dollar rebound? We take a closer look at the Canadian dollar future forecast and what the latest Commitments of Traders report says about the currency. Bank of Canada remains cautious - impacting trader optimism, but better data has us rethinking an earlier prediction.

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BoC preview: binary odds

Expectations for today’s Bank of Canada rate decision are low – consensus expects rates to be maintained at 1%. Thus the real driver for the currency will be in the Bank’s statement. Last October, the BoC said that the “Governing Council will be cautious in making future adjustments in the policy rate”. Markets focused on the word “cautious”, believing that the outlook for further hikes in 2017 w…

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CAD forecast: the coming economic downturn in Canada

CAD forecast: forex investors have reason to be cautious about the Canadian dollar. Changes in crude oil and real estate prices indicate a coming reversal of fortune.

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Economic calendar

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