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Market Insights

Trading Insights: CAD FX in spotlight

Copy of Blog Images - Skilling - 2023-06-07T104303.563

Today’s economic calendar

Bank of Canada (BOC) interest rate decision

  • Current rate 4.5%
  • Consensus calling for BOC to hold the rate at 4.5% today
  • Prospects for a July hike can not be ruled out
  • Canada’s inflation outlook could be pointing towards higher inflation outlook, however, a slowing economy is seen as a reason for the expected holding off of hiking today, leaving room for a July hike
  • Upside risk for CAD FX pairs i.e. stronger CAD against the majors remains a prospect

Screenshot 2023-06-07 105055
Source: TradingView / J. Knobel June 7 2023 6:36 UTC


Commentary & insights

If the ECB is set to continue hiking rates while BOC looks set to hold rate hikes, why has the Euro been weakening against the CAD?

Looking forward, there could be a chance that the Bank of Canada (BOC) might have to reverse its plans to hold rates:

Still strong Canada consumer price inflation after CPI for April indicated stronger than expected headline inflation. Increasing CPI could be a trigger for the BOC to remain in a rate hiking cycle. This prospect could help strengthen the CAD against other developed currencies.

Screenshot 2023-06-07 105125
Chart 1 Canada Inflation Rate Month on Month as of June 7 2023 7:37 UTC

EUR / CAD prospects for further downside?

  • Current price: 1.4326
  • Key resistance seen near 1.4620
  • Upside risk above 1.4620 could place 1.5233 in sight as an upside extension
  • Downside prospects for 1.3730 can not be ruled out in the medium term (26-49 days)

Bottom line: there is scope for EUR / CAD speculators to potentially profit if the prevailing 30 day downside move continues to gather momentum, however the risk if price clears above the 1.4620 resistance could sway the short sellers to reverse direction. See chart below.

Screenshot 2023-06-07 105250
Chart 2 EUR/CAD of June 7 2023 7:38 UTC

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Not investment advice. Past performance does not guarantee or predict future performance.