In our most recent Weekly preview (published on Mondays), we asked the question:
So far this week, that uptrend has indeed been respected.
Yesterday (Tuesday, Dec 6), USDCAD has broken above the:
- 50-day simple moving average
- previous cycle high at 1.36457
- downward trendline from the October top
Why has the loonie been falling?
The CAD has been driven recently by softer oil prices and subdued risk sentiment.
Hence no surprise that the loonie has weakened against most of its G10 peers so far this month, except for the Norwegian Krone – another oil-linked currency.
Also, considering USDCAD’s gains in recent sessions, it appears that markets are expecting a relatively dovish decision by the Bank of Canada later today.
- The median estimate in Bloomberg’s survey of economists sees the BoC raising rates by 50bps to 4.25%.
A 25-basis point hike backed up by hawkish talk of more potential tightening may support the CAD.
- But just under half of analysts surveyed by Reuters only expect a smaller quarter point move. And if the central bank hints that it is near to peak rates, then sellers may emerge.
If so, USDCAD may test its 50-day SMA for immediate support, which currently resides just below 1.357.