By Ketki Saxena
Investing.com-- The Canadian dollar weakened against its U.S. counterpart today on risk-off-market sentiment after Moody’s downgrade of China’s credit outlook, pressuring the risk-sensitive loonie and boosting bids for the safe haven USD.
Market sentiment also remained cautious as US economic data came in mixed.
JOLTS data showed US job openings in October dropped to their lowest level since early 2021, indicating a cooling labour market. US Services activity meanwhile ticked higher in November.
Up next for the pair, eyes will be on the Bank of Canada’s monetary policy decision tomorrow.
While a rate hold from the Bank of Canada widely expected, markets will be closely parsing commentary to determine when the Canadian Central Bank will begin cutting rates. According to a survey of economists by Bloomberg, the first rate cut is expected in Q2 2024.
However, if the Bank of Canada delivers a dovish rather than “hawkish hold, markets could begin pricing in rate cuts sooner, providing further downside to the Canadian dollar.
Analysts at Monex Canada note, “Whilst [The BoC is] almost certain to keep policy on hold, a recognition that rate cuts will need to be delivered by policymakers, with the economy already on the brink of recession, is likely to see some USDCAD upside into year end as faster policy easing is increasingly priced in by markets.”
On a technical level for the pair, analysts at FXStreet note, “The USD/CAD is still within shooting range of a technical bounce from the 200-day SMA just north of the 1.3500 handle, and a continued recovery from the US Dollar will see the pair taking a run at the 50-day SMA near 1.3700.”
“On the downside, a break below the week’s bottom bids of 1.3480 will see bearish momentum accelerate, and bears’ sights will be set on 2023’s lows just beyond 1.3100.”