Canadian Dollar hung up in the middle as markets focus on Fed’s Powell


  • The Canadian Dollar spent Thursday mostly hung in place on the charts before catching a moderate bid.
  • Canada Raw Materials and Industrial Product Price beat expectations, but the market is focused elsewhere.
  • Fed Chair Jerome Powell notes that policy is restrictive, but more could be needed, dropping the USD.

The Canadian Dollar (CAD) is catching a late break against the US Dollar (USD) as the Greenback recedes, walking back some of yesterday’s declines that saw the Loonie drop to its lowest prices against the USD since the start of October.

Canada Industrial Product Prices and Raw Materials Price Index numbers for September both beat expectations, but the low-impact data did little to push the CAD into deeper moves with most of the market focused on Federal Reserve (Fed) Chairman Jerome Powell giving a speech to the Economic Club of New York.

Daily Digest Market Movers: Canadian Dollar tunnels sideways, sees some late moves in post-Powell bid

  • CAD mostly sticks to the day’s opening prices after testing the water in both directions.
  • Canadian economic data is strictly low-impact for the day, leaving traders focused on external drivers.
  • Speech from Fed Chair Powell saw an uptick in intraday volatility in USD-based FX pairs, but moves remain limited.
  • USD/CAD is having difficulty extending moves beyond 1.3700 as Loonie hangs on firm.
  • Crude Oil seeing minor uptick for Thursday, providing limited support for CAD.
  • Fed Chair Powell notes that “Inflation is still too high”, and the labor market remains tight, but shows signs of cooling off.
  • A softening USD bid is giving the CAD a chance to flip the day into the green.
  • CAD traders to look ahead to Canadian Retail Sales on Friday.
  • Jerome Powell says higher bond yields are producing tighter financial conditions

Technical Analysis: USD/CAD tests the water beneath 1.3700 post-Fed appearance

The USD/CAD is seeing a late break beneath 1.3700 with intraday action getting pushed into the 50-hour Simple Moving Average (SMA) near 1.3680, with the 50% retracement level of yesterday’s bottom-to-top moves sitting at that price.

Momentum on the daily candlesticks continues to find support from a rising trendline originating from 1.3100, in conjunction with a bullish-leaning 50-day SMA driving into 1.3575 and building a technical support floor to catch any downside extensions in the USD/CAD.

The pair continues to test the boundaries of a descending trendline drawn from 2020’s extreme peaks of 1.4668, and upside momentum could get constrained moving forward as the near-term uptrend runs against long-term resistance.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.

USD   -0.44% -0.04% 0.02% 0.00% 0.03% 0.09% -0.61%
EUR 0.42%   0.39% 0.44% 0.44% 0.45% 0.52% -0.20%
GBP 0.03% -0.39%   0.07% 0.07% 0.08% 0.14% -0.56%
CAD -0.02% -0.44% -0.05%   -0.02% 0.02% 0.07% -0.64%
AUD -0.02% -0.43% -0.05% 0.02%   0.00% 0.07% -0.64%
JPY -0.01% -0.48% -0.08% -0.02% -0.02%   0.07% -0.65%
NZD -0.09% -0.53% -0.15% -0.07% -0.07% -0.04%   -0.72%
CHF 0.61% 0.20% 0.58% 0.65% 0.64% 0.64% 0.71%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.