The Canadian dollar strengthened against its cousin the US dollar and other currencies during last weeks trading session following the release of stronger-than-forecast Canadian inflation data, while an unexpected rate cut by China’s central bank and higher oil prices also boosted the commodity exposed Canadian dollar.
The Canadian dollar was boosted after Statistics Canada reported that the annual rate of inflation rose to a one year high of 2.4% in October, up from 2.0% in September and compared to expectations for an unchanged reading.
The robust data was seen as increasing the likelihood that the Bank of Canada would have to adjust expectations while making monetary policy decisions.
The loonie, as the Canadian dollar is also known, received an additional boost after China’s central bank unexpectedly cut interest rates for the first time in more than two years on Friday.The move came in response to recent signs of a slowdown in the world’s second-largest economy.Oil prices moved higher following China’s rate cut, which fuelled hopes for increased demand for raw materials, including oil. Oil prices also found support amid growing expectations that the Organization of the Petroleum Exporting Countries may decide to curb production at its upcoming meeting next week. Oil prices have been falling since June pressured lower by concerns that global production will outstrip demand.
Weekly bias is slightly on the downside as we have a fresh cross of 21 and 55 EMA on the 4 hours charts, however higher time-frames like daily, weekly and monthly remains bullish. SSRC, RSI and MACD oscillators indicates bearish momentum remains intact. Further decline to 1.11208 and 1.10805 supports are expected in the medium term. A clear break of resistance 1.14651 will commence the bullish trend but as long as this pivot holds, we will keep shorting this pair.
Key economic fundamental release to be monitored in this pair this week is the CAD Core retail sales and GDP.