The Canadian dollar weakened to a two-week low against its U.S. counterpart on Friday, adding to its quarterly decline, as domestic GDP data supported the view that the Bank of Canada is finished hiking interest rates. The loonie was trading 0.6% lower at 1.3570 to the greenback, or 73.69 U.S. cents, after touching its weakest intraday level since Sept. 13 at 1.3576. For the week, it was also down 0.6%, while it lost 0.5% in September and 2.5% in the third quarter and a part of this (move on Friday) was driven by month-end flows so far and also the weak GDP print. The data suggests that the Bank of Canada is likely at its terminal rate and that the prior rate hikes are doing their job and working towards slowing activity.
Canadian economic growth ground to a halt in July as the manufacturing sector posted its biggest decline in more than two years, while a preliminary estimate showed GDP edging up 0.1% in August. Money markets see a 26% chance of a rate hike at the BoC’s next policy decision on Oct. 26, down from 31% before the data. You do have the ramifications of a stronger (U.S.) dollar against most other currencies as well. It does feel like the U.S. is better equipped to deal with this higher-for-longer message that we are seeing play out in the markets.
The U.S. dollar clawed back its earlier decline to stay near a 10-month high against a basket of major currencies, while the price of oil, one of Canada’s major exports, was 1% lower at $90.79 a barrel. Canadian government bond yields fell across the curve, with the 10-year (CA10YT=RR) down 4.1 basis points at 4.032%.
Intraday Analysis | 1H |
Technically the pair seems to follow 12345 bullish impulse structure on intraday chart. Having said this, it is possible to follow 2 setups (bearish and bullish) on levels shown on the chart. On the short side, it is good to monitor and manage the position closely and move stop loss to breakeven as soon as possible. In this case the expected pullback could take the form of ABC or ABCDE Pattern. Levels may change, so follow our updates below or on our website.
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