Canadian Dollar trims into the upside on Wednesday as markets await US PPE and Retail Sales – Crypto News – Crypto News
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USD/CAD erases Tuesday's losses on a firm US dollar ahead of FOMC minutes USD/CAD erases Tuesday's losses on a firm US dollar ahead of FOMC minutes

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Canadian Dollar trims into the upside on Wednesday as markets await US PPE and Retail Sales – Crypto News

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  • Canadian Dollar pulls back to even against US Dollar midweek.
  • Canada brings little data of note to the table.
  • US PPE, Retail Sales on offer for Thursday.

The Canadian Dollar (CAD) found some room on the upside at the midweek inflection point as investors await Thursday’s US Producer Price Index (PPI) and Retail Sales figures. The CAD continues to wrestle with the US Dollar (USD), but the Canadian Dollar is on pace to be one of the strongest performers this week as the only major currency entirely in the green.

Go figure! Canada’s high-performance week comes when there’s no meaningful Canadian data on offer. Canadian Manufacturing Sales for January, slated for Thursday, are expected to recover to 0.4% from the previous -0.7%. Canadian Housing Starts come on Friday, expected to tick up slightly to 230K from 223.6K. Neither print is expected to draw much attention, if any.

After Thursday’s US PPE and Retail Sales, Friday will wrap things up with another round of University of Michigan Consumer Sentiment and Expectation prints for March. UoM Consumer Sentiment is forecast to hold steady at 76.9, while UoM Consumer Inflation Expectations last showed US consumers expected annual inflation to land somewhere around 2.9%.

Canadian Dollar price this week

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.14% 0.40% -0.16% -0.10% 0.54% 0.24% -0.06%
EUR 0.13%   0.53% -0.04% 0.03% 0.68% 0.37% 0.08%
GBP -0.39% -0.52%   -0.56% -0.49% 0.16% -0.14% -0.44%
CAD 0.17% 0.03% 0.56%   0.06% 0.67% 0.40% 0.10%
AUD 0.09% -0.04% 0.49% -0.07%   0.64% 0.33% 0.04%
JPY -0.53% -0.68% 0.09% -0.72% -0.64%   -0.30% -0.61%
NZD -0.24% -0.38% 0.16% -0.41% -0.34% 0.30%   -0.30%
CHF 0.04% -0.07% 0.44% -0.10% -0.05% 0.59% 0.28%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical analysis: USD/CAD stuck into week’s lows as Canadian Dollar fights back

The Canadian Dollar (CAD) started Wednesday on the front foot, finding gains against the majority of its major currency peers before slightly softening during the American trading session. At the time of writing, the CAD is down around a sixth of a percent against the Australian Dollar (AUD) and tipping into the red against the Euro (EUR) but still within a tenth of a percent of the day’s opening bids. The CAD is up around a fifth of a percent against the US Dollar and has gained around a sixth of a percent against both the Swiss Franc (CHF) and the Japanese Yen (JPY).

USD/CAD slipped back into the week’s low bids as the Canadian Dollar found firmer footing, setting a new low for the week near 1.3460. The pair is still on the high side of last week’s swoon into 1.3420, and near-term price action has a technical ceiling priced in at the 200-hour Simple Moving Average (SMA) near 1.3520.

Daily candles continue to get hung up on the pair’s 200-day SMA at 1.3478, and directional momentum remains limited despite a recent pattern of higher highs. A supply zone is priced in just above the 1.3400 handle.

USD/CAD hourly chart

USD/CAD daily chart

 

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

 

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