By Ketki Saxena
Investing.com -- The Canadian dollar was little changed against its US counterpart today, even as the US dollar retreated against a basket of major currencies, pressured by declining US bond yields and profit-taking after last week’s rally.
Despite gains in crude, which lent some support to the commodity-linked loonie, the Canadian dollar was pressured by uncertain risk sentiment ahead of tomorrow’s all important US CPI data.
The loonie also continues to come under pressure from diverging expectations for further rate hikes from the Bank of Canada and the US Federal Reserve.
Analysts at Commerzbank (ETR:CBKG) however, note that markets are likely to soon cement in bets for no further rate hikes from the Fed, thereby boosting the loonie.
They note that the BoC and Fed’s “Difference in monetary policy is currently supporting USD/CAD. In the coming weeks, however, it is likely to become clear that there will be no further rate hikes in the US either.”
“As we expect a recession in the US next year, while the Canadian economy is likely to achieve a soft landing, we see CAD recovery potential next year.”
On a technical level for the USD/CAD pair, FX Street analysts note, “The USD/CAD is struggling to maintain bullish momentum following last week’s rebound from the 50-day Simple Moving Average (SMA) near 1.3630. A continuation of downside moves will see last Friday’s rejection from 1.3850 firm up into a technical ceiling below November’s early high bids near 1.3900.”
“On the downside, a bearish extension will see challenges from the 200-day SMA currently pushing upward through 1.3500.”