The Canadian Dollar weakened further against its US counterpart, as a dismal string of Canadian economic data worsened forecasts for the domestic currency. Indeed, the CAD just narrowly escaped breaking below major technical support versus the USD; a sudden Greenback reversal meant that the USD/CAD stuck to its multi-month trading range.
Canadian Dollar Forecast Worsens on GDP Results
Fundamental Outlook for Canadian Dollar: Bearish
- Canadian dollar drops on Bank of Canada interest rate cut
- Technicals point to potential for US Dollar/Canadian Dollar breakout
- View our monthly Canadian Dollar Exchange Rate Forecast
The Canadian Dollar weakened further against its US counterpart, as a dismal string of Canadian economic data worsened forecasts for the domestic currency. Indeed, the CAD just narrowly escaped breaking below major technical support versus the USD; a sudden Greenback reversal meant that the USD/CAD stuck to its multi-month trading range. Yet it serves to note that the USD/CAD continues to make a series of higher lows, and overall price momentum certainly favors a major US dollar breakout. It will be critical to watch Canadian dollar price action in the week ahead.
A busy week of Canadian economic data suggests that we will continue to see substantial volatility through near-term trade—perfect conditions for a major breakout. The highlight will come on Friday’s Net Change in Employment report, but it will be likewise important to watch results in earlier New House Price Index and Housing Starts news releases. Fourth quarter GDP results showed a near-universal contraction in major sectors of the Canadian economy, and all signs point to further employment and real estate market deterioration. Labor-intensive manufacturing industries have been especially affected by fast-falling global consumer demand. Combined with clear downtrends in domestic consumer spending, these effects will continue to weigh on Canadian labor markets through the foreseeable future.
A negative panorama for Canadian growth may just be enough to force the USD/CAD through the critical 1.3000 mark. Moreover, both of our technical analysts believe that it is only a matter before the Loonie busts through support—lining up quite nicely with our fundamental trading bias. – DR
