During the past week, the Canadian dollar showed some signs of rupturing. It was a roiling affair that began to subside late in the week. This was due to the fact that the country is one of the largest oil exporters in the world. Despite this, it still remains a high beta currency, which means it will be pressured by risk aversion. This will be exacerbated by the fact that China is starting to show interest in the oil market. However, the currency still hasn’t found its footing.
The best time to trade this currency pair is during the North American trading session. During this time, the pairing is often spotted during the high volume sessions. It is also highly correlated with oil prices, so it is not surprising to see this currency pair take off from time to time. A lot of traders will use this pair as a hedge against buying US crude oil. The pairing will likely have another week to fall. The Australian dollar, on the other hand, was tepid on the move this week as the Reserve Bank of Australia downgraded the currency.
While the dollar index may not be the best indicator of the health of the US economy, it does give a glimpse of the health of the Canadian dollar. This is due to the fact that Canada is one of the world’s largest crude oil exporters. The country is also one of the largest importers of oil. As the country continues to reduce its reliance on oil exports, it becomes more important for Canada to maintain a healthy domestic economy. This is particularly the case as the country is preparing to welcome in the holiday season. In light of this, the Bank of Canada is likely to be keen to slow down its rate hikes in order to cool off inflation.
The other notable move was the Canadian CPI, which surpassed the expected numbers. This was the only data release of note during the week, so it is not surprising to see the pairing surge in anticipation of the release. However, the CPI is not likely to be as impressive as the CAD’s gizmo-related number.
On the other hand, the Fed is likely to be far more interesting than the Canadian Central Bank when it comes to rate hikes. While the FOMC may make some comments on the financial health of the US economy, the chances of any changes in rates in December are slim. In fact, the Fed may very well be forced to wait until next year to make any moves at all. In light of this, the dollar and the Canadian dollar could very well see further deterioration. This is not to mention the fact that the Federal Reserve is expected to move to a less hawkish interest rate path in December. The Fed may also be forced to cut back on its stimulus programs in order to avoid the dreaded double dip recession.
