News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Mixed
GBP/USD
Bearish
USD/JPY
Bearish
More View more
Real Time News
  • Looking for a new way to trade reversals? One of the most used reversal candle patterns is known as the Harami. Like most candlestick formation patterns, the Harami tells a story about sentiment in the market. Get better with trading reversals here: https://t.co/rfwUWJfbz9 https://t.co/jmcAIW4w5k
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZBx7g https://t.co/M9isuvnzqF
  • The British Pound is giving back some of its multi-month gains with some pairs testing notable support despite a positive fundamental backdrop. Get your market update from @nickcawley1 here: https://t.co/6Ct5R0H41F https://t.co/c4rXmMjMrv
  • Dealing with the fear of missing out – or FOMO – is a highly valuable skill for traders. Not only can FOMO have a negative emotional impact, it can cloud judgment and overshadow logic. Learn how you can control FOMO in your trading here: https://t.co/lgDf5cVYOn https://t.co/4dhCP5pnxM
  • Gold is facing the neckline of a Double Bottom Pattern after bouncing off a confirmed longer-term trendline. Is a bullish reversal in order? Get your market update from @FxWestwater here: https://t.co/kLXZewWBMd https://t.co/w1Nu0z569m
  • Central banks often deem it necessary to intervene in the foreign exchange market to protect the value of their national currency. Learn how central bank intervention can impact your trading here: https://t.co/8G8mUX4so6 https://t.co/Gn41XsGktg
  • Rollover is the interest paid or earned for holding a currency spot position overnight. Learn how to earn rollover interest on your open positions here: https://t.co/SRsG8CxjEn https://t.co/2AR1qgx0tz
  • The New Zealand Dollar is in a tricky spot. On one hand, rising stocks can propel NZD. On the other, a dovish RBNZ ahead could cool bond yields as the government tackles soaring housing costs. Get your market update from @ddubrovskyFX here: https://t.co/5rjm2gr3EL https://t.co/aLwhWHMPqz
  • Knowing how to accurately value a stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here: https://t.co/QszmdZFxlk https://t.co/obH0RFLKhC
  • It was a big Q1 for $USDJPY but so far Q2 has been a far different tone. Which side will prevail? Get your market update from @JStanleyFX here: https://t.co/TxlD3zoglZ https://t.co/rUQnokAx30
Canadian Dollar Forecast: Bond Yields Sink USD/CAD, TSX Eyes March High

Canadian Dollar Forecast: Bond Yields Sink USD/CAD, TSX Eyes March High

Daniel Dubrovsky, Strategist

Canadian Dollar, USD/CAD, Bank of Canada, TSX Composite – Talking Points

  • Canadian Dollar has been rising with medium-term bond yields
  • USD/CAD downtrend faces next key barrier towards 2020 low
  • TSX Composite eyeing March high, is upside momentum fading?

The Canadian Dollar has been on a winning streak against its G10 counterparts, excluding the Norwegian Krone. Might this trend continue, especially versus the US Dollar? A closer look shows that gains in CAD since late June have been coinciding with rising Canadian government bond yields on the far end of the curve. Those on the front end are being depressed by quantitative easing efforts from the Bank of Canada.

On the chart below, my majors-based Canadian Dollar index can be seen touching its highest in almost 3 weeks. This is as local 10-year and 30-year government bond yields reached their highest in over 2 months. The latter seem to be hinting at rising confidence in economic growth prospects in the medium term, perhaps eventually opening the door to a less-dovish BoC that would likely boost the appeal of the Canadian Dollar.

Forex for Beginners
Forex for Beginners
Recommended by Daniel Dubrovsky
Why do interest rates matter for currencies?
Get My Guide

In fact the Canadian benchmark stock index, the TSX Composite, spent most of Wednesday trading lower after gapping higher. While it still ended the day +0.47%, it should be noted that rising medium-term borrowing cost expectations could act as a brake pedal for local equities. Still, in the short run, low interest rates and quantitative easing could keep market sentiment upbeat.

Medium-term government bond yields in the United States have also been rising. The US is Canada’s largest trading partner, with over 70% of local exports heading south across the border. Fiscal stimulus expectations in the former could imply a positive knock-on effect for the latter. Rising trade tensions are a risk however after US President Donald Trump announced the reintroduction of Canadian aluminum import tariffs on August 16.

Discover your trading personality to help find optimal forms of analyzing financial markets

Canadian Dollar Vs Local Government Bond Yields

Canadian Dollar Forecast: Bond Yields Sink USD/CAD, TSX Eyes March High

*Majors-Based Canadian Dollar Index Averages CAD Against USD, EUR, GBP and JPY

USD/CAD Technical Outlook

USD/CAD closed at its lowest since late February, surpassing early August lows as the dominant downtrend since late March continued. Guiding the pair lower is falling resistance, red parallel lines on the daily chart below.

Positive RSI divergence does show that downside momentum is fading, which can at times precede a turn higher. A push above resistance exposes the 1.3486 – 1.3521 inflection range. Otherwise, taking out 1.3198 opens the door to perhaps revisiting 2020 lows.

USD/CAD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 11% -27% -7%
Weekly 12% -15% 0%
What does this mean for USD/CAD’s trajectory ahead?
Get My Guide

USD/CAD - Daily Chart

Canadian Dollar Forecast: Bond Yields Sink USD/CAD, TSX Eyes March High

Chart Created in TradingView

TSX Composite Technical Outlook

The TSX Composite is fast approaching the 16816 inflection point, guided higher by rising support from late March. Breaching this technical barrier may open the door to testing 17230 on the way towards the all-time high. Negative RSI divergence does persist, showing fading upside momentum.

TSX Composite - Daily Chart

Canadian Dollar Forecast: Bond Yields Sink USD/CAD, TSX Eyes March High

Chart Created in TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES