Canadian Dollar Weakens Against Greenback, Amongst Worst Performers Today By

By Ketki Saxena

Investing.com — The weakened against its US counterpart today as crude prices slipped, driven by a strengthening dollar and profit-taking following crude’s recent post-Fed rally. 

The Canadian dollar was also pressured by housing data that indicated a slowdown, suggesting that the Bank of Canada’s rate hikes are beginning to make their effect felt and providing some impetus to bets that the Bank of Canada may be nearing the end of its rate hike cycle. 

Today’s price action saw the Canadian dollar giving back much of its weekly gains, and closing as one of the day’s worst performing G-10 . 

The US Dollar meanwhile gained support from an upbeat Michigan Consumer Sentiment index, improving the outlook for the US economy – and further posing a tailwind for the loonie as a slowdown in the Canadian economy looks more likely than one in the US. 

A range of analysts including at Macquarie, Nomura, and TD (TSX:) have suggested this continued US economic resilience will pressure the loonie in the medium term. 

In the short term however, analysts at Scotiabank (TSX:) note, “The CAD still looks undervalued from a short-term fundamental point of view. The influence of spreads, stocks and commodity prices on the CAD are strengthening but remain low; this trend should extend if markets remain persuaded that the Fed is unlikely to tighten further after July and will add some tailwinds to the CAD.”

 On a technical level for the pair, analysts at FX Street note, “A clean break below 1.3050 would reverse the trend and suggest an overall more bearish picture for USD/CAD. On the other hand bulls have their work cut out for them and it will take a decisive break above the 50-day SMA at 1.3400 to reinvigorate the USD/CAD uptrend again.”

“Bulls still marginally have the upper hand despite the bearish climate, with the odds slightly favoring an eventual recovery and a continuation higher. Key levels, however, are being threatened.”