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Canadian Dollar Prints Fresh 7 Month Low As Risk-Aversion, Crude Prices Weigh

Published 2023-10-26, 05:46 p/m
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USD/CAD
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By Ketki Saxena

Investing.com -- The Canadian dollar printed a fresh seven month low against its US counterpart today as market sentiment remained risk-off, crude prices fell, and Bank of Canada Governor stated that the BoC may not need to hike rates again. 

“It feels like a classic risk-off move here, with equity market weakness denting risk sentiment and underpinning the USD,” said George Davis, chief technical strategist at RBC (TSX:RY) Capital Markets.

Equity markets remained pressured by mixed megacap earnings, and as US Treasury yields hovered near 5%. 

 “Weaker oil prices are also weighing on CAD.”

Crude prices fell 2% today, reversing yesterday’s gains as it appears that Israel may heed calls refrain from a ground invasion of Gaza. 

The Canadian dollar, which weakened yesterday after the Bank of Canada’s interest rate hold, was further pressured by comments from BoC Governor Tiff Macklem. In an interview to CBC, Mr. Macklem stated that “The economy is not overheated anymore and ... we do think there's more inflation relief in the pipeline, and if that comes through, we won't have to raise rates further”.

Canadian preliminary manufacturing data also showed a decline, adding to signs of a weakening domestic economy. 

The US economy meanwhile continues to stay resilient, with GDP data coming in well above estimates. 

The positive economic data helped the greenback rally against a basket of currencies. Risk-aversion also supported the safe haven greenback. 

On a technical level for the pair, analysts at FX Street note, “If US Dollar bulls can successfully push the USD/CAD into the 1.3900 level, that will leave the charts open for a challenge of 2022’s peaks of 1.3978 set back in October of last year.”

“The last meaningful swing low sits just below 1.3600, while additional technical support is coming from the 50-day Simple Moving Average (SMA) just north of that same level.”

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