FxNews—The S&P/TSX Composite Index experienced a slight drop of 0.4%, sinking below the 24,390 mark this Tuesday. The decline came as the market reacted to new inflation figures and a slump in the energy sector following a long weekend.
Canada’s Inflation Drops to 1.6%, Lowest in 3 Years
Inflation in Canada decreased to 1.6% in September, the lowest it has been in three years, and stayed under the anticipated levels and the Bank of Canada’s (BoC) goal of 2%.
With core inflation remaining stable, there’s growing anticipation that the BoC might soon reduce interest rates by 50 basis points. Significant energy companies like Suncor and Imperial Oil also saw their stock values decline by 3.1% to 4.5% due to falling oil prices.
TD Bank also saw a near 1% decrease in its stock value, continuing its downward trend after being fined by the US Department of Justice for money laundering.
Canada’s 10-Year Bond Yields Dip Amid Soft Inflation
Canada’s 10-year government bond yield dipped below 3.2%, continuing to fall from the 3.26% high seen on October 9th. This reduction reflects the market’s response to ongoing soft inflation data, fueling expectations of deeper rate cuts by the BoC.
September’s inflation report showed a decline to 1.6%, the lowest rate in three years, missing the forecasted 1.8%. However, it also indicated that price growth has remained within the BoC’s target for two consecutive months.
The core inflation rate, closely watched by the central bank, has not increased, suggesting that inflation could keep slowing down into the next year. This scenario has led some market participants to expect a more substantial 50 basis point cut in the upcoming central bank meeting, potentially the third in a row and the first of this magnitude.
USDCAD Technical Analysis – 15-October-2024
FxNews—The American dollar trades a robust uptrend against the Canadian currency, hitting the $1.384 barrier today. This barrier is the %78.6 Fibonacci retracement level of the AB wave, also in conjunction with the April 2023 high.
The daily chart shows the Stochastic Oscillator is far into the overbought territory, recording 93 in the description. Furthermore, the RSI 14 supports the Stochastic Oscillator by depicting 72 in the description.
Overall, the technical indicators suggest the primary trend is bullish, but the U.S. dollar is extremely overpriced against Loonie.
USDCAD Price Forecast – 15-October-2024
From a technical perspective, a consolidation phase should be on the horizon because the USD/CAD price is overbought. Hence, it is not advisable to join the bull market unless the price dips to lower support levels.
The Awesome oscillator shows bearish signals in the 4-hour chart. Therefore, we expect the Canadian dollar to erase some of its loss near the 23.6% Fibonacci retracement of the DE wave.
Traders and investors should monitor the 23.6% and the 38.2% Fibonacci retracement levels for bullish signals such as candlestick patterns.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.
