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Canadian Dollar Weakens on First Trading Day of New Year

Published 2024-01-02, 05:46 p/m
© Reuters.

By Ketki Saxena 

Investing.com – The Canadian Dollar weakened against its US counterpart today, pressured by weak domestic economic data, backsliding crude prices and uncertain risk sentiment in equities. 

The US Dollar meanwhile gained across a basket of major currencies, as investors adjusted expectations for Fed rate cuts, boosting US treasury yields. 

The Canadian dollar faced pressure from all quarters today.

Crude prices slid as investors optimism about rate cuts waned, and as Red Sea (NYSE:SE) tensions eased. 

The risk-sensitive loonie was also pressured by uncertain sentiment in equities as Apple shares (NASDAQ:AAPL) fell, following a downgrade from Barclays (LON:BARC). 

Meanwhile, Canadian economic data showed further signs of a weakening economy, as the Canadian S&P Global (NYSE:SPGI) Manufacturing Purchasing Managers’ Index (PMI) hit an over three year low. 

The US dollar meanwhile gained against a basket of currencies as US Treasury yields rose, and ahead of key employment data this week. 

This week, the US economic docket on the employment front quill include December’s Unemployment Rate, Nonfarm Payrolls, and Average Hourly Earnings. Investors will also be awaiting Wednesday’s release of the FOMC Minutes from the previous meeting. 

Looking ahead for the USD CAD pair, Bipan Rai, head of FX strategy at CIBC (TSX:CM) Capital Markets notes, “We’re expecting a period of weakness over the first quarter for the Canadian dollar”. 

“That is primarily tied to our view that we don’t think the market is pricing the U.S. dollar appropriately.”

On a technical level for the pair, analysts at FXStreet note, “Despite a near-term rebound in the Greenback, the USD/CAD remains firmly planted in bear country with price action well below the 200-day SMA near the 1.3500 major handle, but the technical outlook favors bidders heading into the new trading year.”

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“Technical indicators are pinned firmly into oversold conditions, with both the Relative Strength Index (RSI) and the Moving Average Convergence-Divergence (MCAD) signaling ripe buying conditions as the indicators roll over.”

 

Latest comments

This is just the beginning. USDCAD is head back to the highs
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