USD/CAD Rallies To 3 Year Highs Ahead Of BOC Rate Announcement
Benzinga | Dec 03, 2013 11:38PM ET
On Tuesday, the U.S. Dollar climbed to the highest levels against the Canadian Dollar since August of 2010.
Recent positive economic data out of the U.S. has helped to underpin the greenback, fueling expectations of a possible taper of the $85 billion-a-month bond buying program at the December 18 Fed meeting. On Monday, the Institute for Supply Management reported that manufacturing in the U.S. accelerated in November, rising to 57.3 percent from 56.4 percent in October and reaching the highest level in over two years.
This Friday's U.S. employment report will be a focal point in upcoming Fed monetary policy. While speaking with Bloomberg TV in late November, James Bullard, president of the Federal Reserve Bank of St. Louis, said, "A strong jobs report, I think, would increase the probability some for a December taper." Canadian employment data is also scheduled to be released on Friday.
Meanwhile, investors are sizing up the odds of a cut in the Bank of Canada’s benchmark lending rate. The BOC is due to announce their decision on interest rates on Wednesday at 10:00 am Eastern Time. The BOC benchmark interest rate is currently at 1 percent.
The Loonie, as the Canadian Dollar is known, owing to the bird on the Canadian $1 coin, lost ground last Friday despite a positive Canadian GDP report. Statistics Canada reported that gross domestic product expanded 0.7 percent from 0.4 percent in the second quarter.
Crude oil is another factor that has pressured the Canadian currency. Over the past several months, crude oil, which has a strong positive correlation with the Canadian dollar, has sold off sharply. Canada is one of the top ten oil producers in the world and the price of oil is often looked to as a leading indicator for the price movement of the Canadian Dollar.
USD/CAD Daily Chart
Looking at the USD/CAD daily chart we can see that price is trading well above both the 50 and 200 period simple moving averages. Momentum indicator RSI is showing a reading of 73, signaling potentially overbought conditions on the daily time frame.
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