Canadian Dollar Outlook Worsens as Crude Oil Breaks Below $50

The Canadian Dollar continued its dramatic descent against the US Dollar, as fast-falling oil prices sunk the Loonie while the US Dollar benefited from similarly sharp losses in the Dow Jones Industrials Average. The downtrodden Canadian currency now trades near four-year lows, and there is seemingly little to protect the CAD from further losses. Subsequent forecasts for the USD/CAD will obviously depend on the trajectory of the US Dollar itself, but it will also be important to watch for sharp moves in oil prices and other key commodity markets. 

Fundamental Outlook for Canadian Dollar: Bearish

-   Canadian Dollar ignores CPI data – Why?
-   US Dollar/Canadian Dollar Technical Outlook Points Towards 1.3025
-   USD/CAD stays above key technical support – further gains seem likely

The Canadian Dollar has remained largely unscathed by recent domestic economic data, and we do not expect that the coming week’s event risk will force noteworthy moves in the USD/CAD. As a case in point, USD/CAD traders almost completely ignored an astounding surprise in Friday morning Consumer Price Index data—one of the most historically market moving events on the Canadian economic calendar. We saw far more volatility surrounding Tuesday’s US Crude Oil Inventories report, as corresponding moves in NYMEX Crude Oil prices forced similarly pronounced moves in the USD/CAD. As such, we will keep an eye on US Department of Energy Crude Oil and Distillate Inventories releases at 10:35 EST on November 26. Crude prices now trade below the psychologically significant $50 mark, and further losses would likely produce similarly disappointing performance in the Canadian currency.

It remains especially difficult to predict USD/CAD price action through shorter time frames, but overall momentum continues to support US Dollar Strength and Canadian Dollar weakness through longer-term trade. - DR
 
Visit our recently updated USD/CAD Currency Room for more resources dedicated to the Canadian Dollar.