**Canadian Dollar Holds Steady Against USD While Strengthening on Crosses: Market Analysis**
*By Shaun Osborne, FXStreet | Expanded and Rewritten for In-Depth Coverage*
The Canadian dollar (CAD) remained flat against the US dollar (USD) during recent trading sessions, holding its ground despite shifting global economic dynamics and influential monetary policy movements. While its performance versus the USD stayed neutral, the CAD gained traction against other major currencies on the crosses, reflecting nuanced developments in global risk sentiment, interest rate expectations, and commodity markets, especially oil—the lifeblood of the Canadian economy.
This longer-form analysis dives into the underlying drivers of the CAD’s current position in the currency markets, particularly:
– The role of interest rate expectations and central bank policy
– Global risk sentiment and its influence on safe-haven demand
– The impact of oil prices as a major export driver for Canada
– Technical indicators showing potential directional bias across pairs
### CAD vs. USD: Neutral Ground on the Charts
Shaun Osborne, Chief Currency Strategist at Scotiabank, noted in his FXStreet article that the Canadian dollar was essentially flat against the US dollar, hovering around the 1.35 level. The pair continues to trade within a well-defined consolidation range of roughly 1.34 to 1.36, with neither side showing a decisive breakout.
Key points on USD/CAD:
– The 1.35 level has acted as a magnet over recent weeks, reflecting a general market hesitation due to unclear directional momentum.
– Longer-term charts are tilted slightly more bullish for USD, meaning that dips in USD/CAD are likely to find support, rather than initiate a complete trend reversal.
– Both economic data and the Bank of Canada’s (BoC) signals have prevented the CAD from pushing through major resistance levels with conviction.
This neutral balance in USD/CAD comes amid contrasting economic trajectories for the US and Canadian economies. Despite Bank of Canada’s recent pause in rate hikes, the US Federal Reserve’s hawkish stance continues to lend support to the greenback, limiting the CAD’s ability to strengthen meaningfully on this pair.
### Cross Currency Strength: CAD Pushes Higher Elsewhere
While subdued against the US dollar, the CAD has been showing more life on the currency crosses. According to Scotiabank’s research, the CAD gained ground against the euro (EUR), British pound (GBP), Japanese yen (JPY), and Australian dollar (AUD), among others. The bounce on the crosses appears more sustainable, thanks to relative strength indicators and shifting market flows.
Some highlights:
– **CAD/EUR**: The pair has managed to bounce off key support levels, showing signs of recovery. The eurozone economy remains pressured by high inflation and low growth, contributing to relative weakness in the EUR.
– **CAD/GBP**: With the UK’s economy wobbling under high inflation and weak growth, sterling has seen diminished demand, allowing CAD to capitalize.
– **CAD/JPY**: The yen remains under pressure as the Bank of Japan maintains its ultra-loose monetary policy with negative interest rates. CAD/JPY benefits from yield differentials, pushing it higher.
– **CAD/AUD**: A highly commodity-sensitive pair, CAD/AUD has been influenced by diverging trends in their key export commodities—oil in Canada’s case, and iron ore for Australia. Relative outperformance in oil lends support to CAD.
The Canadian dollar’s broader strength, particularly on these crosses, suggests underlying resilience, supported by a stable domestic economy and favorable macroeconomic dynamics relative to peers.
### Bank of Canada: Cautious but Data-dependent
The Bank of Canada continues to walk a fine line amid elevated but declining inflation, and a softening labor market. After delivering 10 consecutive interest rate hikes since March 2022, bringing the benchmark policy rate to 5.0 percent, the central bank has signaled a data-dependent approach going forward.
Key monetary policy takeaways:
– Inflation
Read more on USD/CAD trading.