The Canadian dollar is coupled with the Mexican peso as the worst performing major currencies over the past month, and is one of the worst performing over the past six months.
Canada’s economy has been slowing down more than expected in the second half of last year, as indebted households have begun slowing down spending. The economy grew at an annualized pace of 1.7 percent in the fourth quarter, according to Statistics Canada on Friday, versus economist expectations for 2 percent growth. Additionally third-quarter gross domestic product growth was also revised down.
Trump’s proposed tariffs riled markets and will have a great negative effect on Canada’s trade performance. With trade uncertainties mounting and inflation still reasonably well behaved, this gives the Bank of Canada plenty of leeway to stay cautious on lifting interest rates.
Technically with Fibonacci retracement applied on the daily USD/CAD, the price is now facing a huge resistance placed by the retracement level (0%) after a surge lasted for more than a month.
Coupled with analysis from Relative Strength Index, it is positioning at the overbought area, signalling a selling alert to investors to avoid higher potentially risk for downward move.
Chart 1: USDCAD Daily
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