The Canadian Dollar (CAD) remained stuck against the US Dollar on Thursday as the Loonie traders started the new year with caution. After a significant decline in the last quarter of 2024, the CAD is struggling to find its footing amid market expectations impacting the currency. Canadian PMI data for December exceeded expectations but failed to trigger a rally in the Loonie. The overall market volumes remain subdued following the New Year’s holiday on both sides of the border.
The Canadian Manufacturing PMI survey for December climbed to 52.2, beating expectations of a decline to 51.9. Despite the positive data, the Loonie continues to trade near multi-year lows against the US Dollar. On the other hand, US Initial Jobless Claims fell to 221K for the week ended December 27, supporting the US Dollar. The Canadian data has been wrapped up for the week, with all eyes now turning to the US ISM PMI figures due on Friday to wrap up the trading week.
The Canadian Dollar remains in a bearish technical stance as it struggles near multi-year lows against the US Dollar. The USD/CAD chart is hovering near 1.4400, reflecting the ongoing bearish sentiment in the Loonie. The one-sided bearish trend has kept the USD/CAD pair elevated, with CAD bidders struggling to gain momentum. However, failure to maintain the current levels could provide an opportunity for Loonie bulls to push the pair lower towards the 50-day Exponential Moving Average (EMA) around 1.4135.
Several key factors impact the Canadian Dollar, including interest rates set by the Bank of Canada, the price of Oil, the health of the economy, inflation, and the Trade Balance. Market sentiment, as well as the economic conditions in the US, also play a significant role in driving the CAD. The Bank of Canada’s decisions regarding interest rates and its monetary policies have a direct impact on the Canadian Dollar, with higher interest rates generally being positive for the currency.
The price of Oil is a crucial factor affecting the CAD due to Canada’s reliance on petroleum exports. Higher Oil prices typically result in an increase in the CAD value, while lower Oil prices have the opposite effect. Inflation, which is traditionally seen as a negative factor for a currency, can actually have a positive impact on the Canadian Dollar in modern times. Strong economic data releases, such as GDP, manufacturing, and employment figures, can also influence the direction of the CAD.
Overall, the Canadian Dollar continues to face challenges as it remains underbid near multi-year lows against the US Dollar. Market conditions and economic data releases will continue to guide the direction of the Loonie in the coming weeks. Traders and investors will closely monitor key factors such as interest rates, Oil prices, and economic indicators to gauge the health of the Canadian economy and the future trajectory of the CAD.
