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  • Weekly Commentaries

CAD Continues to Lag Its Peers Against the USD

  • The CAD is still feeling the effects of a sharp drop in crude oil prices. While oil prices haven't played a major role in influencing the CAD, the recent 5% decrease in crude oil prices is too substantial to ignore, even though there's no obvious fundamental cause for this decline. Look for the USD/CAD to trade between 1.3560-1.3812 with fair value estimates of around 1.3721 for the week ahead. 

Canadian Dollar Weekly Commentary

  • Last Friday, the Canadian dollar began showing signs of recovery against the US dollar, avoiding further declines toward the 1.39 mark. This revealed an unexpected resilience in the CAD. However, despite gaining ground against a weakening USD last week, its rise of 0.5% was the smallest among the major currencies. The CAD's performance was dampened by the steep drop in crude oil prices. Interestingly, the currency performance rankings showed the Mexican Peso, Norwegian Krone, and Australian Dollar among the top five, each with gains of at least 2%, while the CAD remained behind its peers, hindered by persistently weak sentiment. The CAD is near its fair value (1.3721), following a prolonged period of trading below this level. The upcoming week's range estimator hints at a slight downward risk for the USD/CAD, potentially reaching 1.3685, within a forecasted range of 1.3560 to 1.3812. The USD/CAD's upper limit is solidifying around the 1.38 area, and the overall trend in the USD suggests that modest gains in USD/CAD are likely to diminish. The lower end of this estimated range seems optimistic for the coming week, and trading is expected to slow down significantly as we approach the Thanksgiving weekend. 

The week ahead

  • This week's significant data releases for Canada include CPI on Tuesday and Retail Sales on Friday. Additionally, the Federal government will present its fall economic update, which typically does not impact the market significantly. Inflation data is anticipated to show a slight easing in the headline CPI, with a 0.2% increase for the month, resulting in a yearly rise of 3.3% in October, a decrease from September's 3.8%. However, core inflation, which has been a major concern for policymakers as evidenced by the recent Bank of Canada's hawkish policy discussion summary, might remain high. Retail Sales for September are expected to be unchanged, consistent with the preliminary estimate provided with the August data. In the United States, the Thanksgiving holiday will affect the week's schedule. The FOMC minutes will be released on Tuesday, while the weekly claims data, Durable Goods data, and the final University of Michigan Sentiment data will be out on Wednesday. Friday will see the release of November’s S&P Global PMIs. 

This week’s trading range

  • Technically, look for the USD/CAD to trade between 1.3560-1.3812 with fair value estimates of around 1.3721 for the week ahead.
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