Canadian Dollar Forecasts: Oscillator Signals Confirm the Trend Higher is to Continue

The Canadian dollar's tear higher is by no means over with studies of the three key CAD markets confirming any weakness will likely be temporary.

• Oscillator signals suggest no chance for a GBP/CAD recovery
• Fade strength in the USD/CAD exchange rate
• EUR/CAD stuck around formidable support at 200 day moving average

The Canadian dollar has been on a tear higher since a long-term period of weakness stalled in early Jannuary 2016.

The catalyst for the recovery was the strong fundamental underpinning provided by a recovery in oil prices; oil remains Canada's single most influential component in the current account i.e the international trade bank balance.

The strength is looking well entrenched against the pound, but there are risks that the move higher is overextended.

Meanwhile, the US dollar is looking to fight back after a poor run while the euro looks incredibly determined to hold onto current levels.

The gains in CAD are therefore not evenly spread with each pair enjoying its own quirks and therefore a specific set of price points and technical indicators determining the outlook.

Latest Pound / Canadian Dollar Exchange Rates

	Live: 1.8616▲ + 0.08% 12 Month Best: 1.8915
*Your Bank's Retail Rate	1.7983 - 1.8057
**Independent Specialist	1.8355 - 1.843 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

GBP to CAD: Growing Risks of Becoming Oversold

The British pound looks weak against the Canadian dollar with the falls from 2016 highs at 2.09 accelerating through February.

The pound to Canadian dollar exchange rate now languishes towards 1.85 and has therefore taken out a target set by Scotiabank’s Shaun Osborne back in February.

The basis of the forecast was the failure of support identified at the time at 1.9740.

The call appears to have been a good one but any further declines risk taking the GBP/CAD exchange rate into oversold territory.

“We still rather think the GBP will retain a weak bias, however, and continue to view overshoot risks as being significant,” says Osborne.

However, being a technical analyst, Osborne will obey the convincing signals that continue to advocate for further losses.

“Oscillator signals are bearishly aligned across a range of timeframes, meaning little or no scope for a major GBP recovery at this point,” says Osborne.

EUR to CAD: Dogged Determination

Looking at the euro to Canadian dollar exchange rate the moves off the 2016 highs towards 1.61 look to be intact.

That said, consolidation around the 1.46 level has been notable. Interestingly, the consolidation is occurring at the 200 day moving average.

The 200 day moving average is often a strong turning point for financial instruments as markets tend to laden this area with sell and buy orders.

This is because they anticipate either the move towards the moving average will end, or accelerate if broken.

"It is possible that the recent chop around 1.4750 has blunted the move down and that we may see a period of range-bound trade unfold from here,” says Osborne.

Scotiabank believe more range-trading around 1.45/1.50 is however likely in the near-term, "Given the strong bounce (albeit with little follow through) from retracement support at 1.4533, it is conceivable that a low is in here.  Look for more ‘rangey’ trade for now."

USD to CAD: Greenback Attempts a Fightback

The US dollar has risen from lows at 1.2923 to move higher to 1.3069 in the mid-week session.

Is this a sign of a potential recovery?

With daily indicators rebounding from a floor, the pair appears to head towards 1.3165.

A break above will mean possibility of retesting graphical levels at 1.3460, this will remain an important hurdle near term.

"We think 1.3400/50 (a broader pivot point for the market in the past 6 months) might be about as much of a rally as the USD can muster for the moment," says Osborne, "we might have to allow for a little more near-term USD strength (1.36) before the underlying trend lower resumes."

Look to fade USD rallies suggests the Scotiabank strategist.