30.10.202010:58 Tinjauan Analisis Forex: USD/CAD: Is it possible for the Canadian dollar to grow?

Exchange Rates 30.10.2020 analysis

The Canadian dollar's dynamics continue in a general downward trend. CAD, like many other currencies, is nervously waiting for the US presidential election, as this recently affects the trends negatively.

Based on the observations of analysts, the Canadian currency has experienced the strongest volatility, showing an up and down movement repeatedly. This Wednesday, it was growing in a stable manner, moving up to 1.3300. However, the USD/CAD pair suddenly reversed, returning to the level of 1.3250, but yesterday, the pair traded near 1.3280, which lost almost 50 points.

Today, the day began with the CAD at the level of 1.3325. This was followed by the USD/CAD pair gaining impulse, moving in the range of 1.3332-1.3333. Experts believe that breaking through the current resistance level of 1.3330 can give an impulse to the growth of the USD/CAD pair to 1.3450, and then close the week to 1.3500.

We are lately filled with information for the Canadian currency and one of which was the meeting of the Canadian regulator. The country's Central bank left the key rate unchanged at 0.25% and their next step is to adjust the asset purchase program. The agency decided to buy long-term bonds that directly affect loan rates, from which the economic development of the country's households and businesses depends on. In addition, Canada's Central Bank has maintained the interest rate until the gap between the actual and potential volume of securities issued is narrowed. Based on calculations, this will happen before 2023.

Bloomberg paid special attention to these nuances of monetary policy. On Wednesday, they released information about the regulator's buying of government bonds. It turned out that it is difficult for the Bank of Canada to maintain the appropriate pace of purchases, so it is necessary to purchase even those securities that have just been issued.

However, such measures was criticized by the political opposition of Prime Minister Justin Trudeau. This party is contradicting the bank's support for fiscal government measures. Experts said that such actions provoke the politicization of Central Bank strategies, when rates are approaching zero and the only way out is fiscal measures.

In terms of monetary policy, the regulator's forecast was quite optimistic. It implies growth in Canada's GDP target by 2.1% this year and a decline by 0.9% in 2021. Tiff Macklem, Governor of the Bank of Canada, said that there are plans to keep the interest rate at 0.25% over the next two years. As a result, the agency extended the policy of zero rates until 2023, while reducing the pace of purchases of state bonds. According to market participants, this puts serious pressure on the Canadian dollar, which is likely to decline in the short and medium term.

This week, CAD sales strengthened, which were catalyzed by the collapse in oil prices. On Wednesday, the price of the benchmark Brent oil declined to the lowest since the summer began. Experts believe that the reason for this is the current reports on raw material reserves. It should be recalled that the dynamics of black gold showed a strong weekly growth since July 2020. According to a report from the US Energy Information Administration (EIA), US oil reserves increased by 4.3 million barrels last week.

Therefore, analysts sum up that it is possible that the Canadian currency will rise to 1.3500, but its dynamics highly relies on the global oil market situation. The US presidential elections, in turn, also puts the currency under pressure, which increases the volatility. Nevertheless, experts expect the situation to be stable and maintain the balance in the USD/CAD pair.

Larisa Kolesnikova,
Ahli analisa
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