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The Canadian currency came under strong pressure this week from its neighbor, the US dollar. Fuel added to the fire risks associated with the difficulty of concluding a "first phase" trade agreement between Washington and Beijing. The current situation strengthened the greenback and weakened the Canadian dollar, analysts said.
At first glance, nothing portended a noticeable subsidence of the Canadian currency. According to Carolyn Wilkins, Deputy Governor of the Bank of Canada, the country's economy is "in good shape" and can even cope with the worsening situation in the global economy. The ministry believes that Canada's financial system is very stable, and the regulator has room to maneuver at a key rate of 1.75%.
However, the rainbow mood quickly gave way to a more critical understanding of reality. Wilkins further stated that increasing risks for the global economy, such as the escalation of trade confrontations, could create problems for the Canadian economy. The Bank of Canada also noted increased uncertainty around global trade, creating a tense external background.
The sharp collapse in oil prices was also a source of pressure for the loonie. Last week, WTI oil futures fell 3.2%, while the light grade was trading at $55.21 a barrel. This is the lowest figure since October 31 this year, experts said. Investors are worried that in 2020, the market may face excessive oil supply and weak demand for raw materials.
Currently, the Canadian dollar, along with the Australian and New Zealand, has come under pressure from the growing US currency. Despite rising inflationary pressures, The loonie dropped to a five-week low against the greenback. The USD/CAD pair returned to 1.3300 on Wednesday, November 20. It tested this level again on Thursday. Analysts believe that the pair is preparing to storm the October highs.
The Canadian dollar sharply fell at the beginning of the week, but USD/CAD pair was able to slightly strengthen its position yesterday. The pair rose to the level of 1.3308 on Thursday, November 21, but could not stay at this height.
In the future, the USD/CAD pair was in the grip of a downward trend. Passing the key level of 1.3300, it dropped to 1.3398–1.3299. Now the pair is trading in this range, trying to get out of it and rise higher.
Analysts suggest that the USD/CAD pair may fall to a significant support level of 1.3227. In the case of this scenario, analysts recommend using long positions. Market players consider a breakout of this level of support as a signal for selling the loonie. However, experts believe that the best times will come for the Canadian dollar, and Canada's strong economy will help it rise.
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