- USD/CAD is currently flirting with its 21-day moving average in the 1.2560s.
- The loonie is one of the worst-performing G10 currencies on the session, despite decent data.
USD/CAD is currently flirting with its 21-day moving average in the 1.2560s. The loonie has largely been unable to make the most of the weakening USD (versus most of its other G10 counterparts) and so USD/CAD is still trading flat on the day. With the DXY now below 93.00, if selling momentum continues (some intra-day USD bears are looking for a move back to test the 92.50 area, where the 200DMA resides), this ought to be bearish for USD/CAD and could result in a move back towards weekly lows around the 1.2540 area.
Driving the day
The loonie is struggling versus the majority of its G10 counterparts on Thursday and currently sits at the bottom of the performance table, despite the fact that crude oil markets are higher. Admittedly, price action in crude oil markets has been choppy amid the recent news that OPEC+ has agreed to gradually increase output from May and that the Saudi Arabians will gradually bring their 1M barrels per day in additional voluntary cuts back online.
In terms of domestic Canadian drivers, February Building Permits data was better than expected, showing MoM growth of 2.1% (expected was -1.4%) and the Canadian Markit Manufacturing PMI survey for the month of March was decent, with the headline index rising to 58.5 from 54.8 in February. As indicated by the price action, strong data has failed to give the loonie any impetus, with the currency perhaps weighed by profit-taking in wake of Wednesday’s outperformance following strong January Canadian GDP data.
Separately, some market commentators are attributing comments from Bank of Canada Governor Tiff Macklem, who expressed concern over the sustainability of the recent increase run higher in house prices and the accumulation of household debt on Wednesday as a negative for the currency (i.e. given the higher risk of household deleveraging and a potential recession at some point in the coming years). But concern about house prices and debt accumulation is more likely to push the BoC to tighten monetary policy conditions to stop these trends from continuing, which ought to be positive for the currency.
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