Canadian Dollar, AUD/CAD, NZD/CAD, GBP/CAD - Talking Points
- Canadian Dollar has been weakening on BoC easing expectations
- CAD may depreciate if Canada CPI, retail sales data disappoints
- Where do AUD/CAD, NZD/CAD and GBP/CAD stand from here?
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Canadian Dollar Fundamentals – CPI Data, Bank of Canada Easing Bets
The Canadian Dollar has been losing ground against the US Dollar and British Pound as of late, but it has fared relatively better against the Australian Dollar and New Zealand Dollar. The former has been battered by rising beats of near-term easing from the RBA. As this week goes on, there may be a chance that CAD loses its ground against AUD and NZD.
Economic news flow out of Canada has been on average churning out at the most disappointing relative to expectations since the end of last year. The Citi Economic Surprise Index for Canada stands at 1.2 as of this writing, down from a peak of 136.40 in June. An increasingly positive outcome translates into higher margins of upside data outcomes. The same health and vigor seen during the summer has now been lost.
As a result, expectations of easing from the Bank of Canada have been on the rise. The central bank has managed to avoid cutting this year, as opposed to the general trend from its major counterparts. With that in mind, similar disappointing data out of the country could underpin near-term BoC easing bets and sink the Canadian Dollar. The markets are pricing in about a 43 percent chance of a 25bp rate cut in January.
October Canadian CPI data will cross the wires on Wednesday. Headline inflation is expected to clock in unchanged from September at 1.9 percent y/y and 0.3% m/m (up from -0.4% prior). On Friday, local retail sales will be released. Sales are expected to shrink 0.3% m/m in September, contracting faster than the -0.1% outcome in August. A worse-than-expected result would mean the sharpest deterioration so far this year.
AUD/CAD Technical Analysis
AUD/CAD has been sinking towards a near-term rising support line from October. This followed a stall under key resistance (0.9105 – 0.9144) which was accompanied by negative RSI divergence. The latter indicated fading upside momentum. The trend line may hold, pushing AUD/CAD higher towards another retest of the psychological area above it. Otherwise, a daily close lower may expose October lows.
AUD/CAD Daily Chart
AUD/CAD Chart Created in TradingView
NZD/CAD Technical Analysis
Meanwhile, NZD/CAD has also stalled at the critical falling channel from March – blue lines below. Sitting under the pair is a near-term rising support line from October. A dismal Canadian CPI report may push prices into and above the key resistance range between 0.8459 and 0.8503. Confirming this with another daily close to the upside could pave the way for a reversal of the dominant downtrend since March.
NZD/CAD Daily Chart
NZD/CAD Chart Created in TradingView
GBP/CAD Technical Outlook
This is as GBP/CAD closed above resistance at 1.7094 on volatile UK election polling. However, prices have stalled under rising support from October – pink lines below. The presence of negative RSI divergence shows fading upside momentum which may precede a turn lower. That would place the focus on a near-term rising support line from October – blue-dashed line. A daily close under this exposes 1.6851 followed by 1.6727.
GBP/CAD Daily Chart
GBP/CAD Chart Created in TradingView
FX Trading Resources
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- See how the Canadian Dollar is viewed by the trading community at the DailyFX Sentiment Page
- Just getting started? See our beginners’ guide for FX traders
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
