USD/CAD Testing Key Support At 1.3140 Ahead Of Razor-Thin Canadian Election
City Index | Oct 18, 2019 13:33
Canadians will head to the polls on Monday to vote in a federal election and the race between incumbent Prime Minister Justin Trudeau and Conservative challenger Andrew Scheer could not be tighter. Voters have only failed to re-elect an incumbent candidate to a second term on four occasions in the country’s history, but recent polls show Trudeau’s approval hovering around record lows, making him vulnerable against the former youngest-ever Speaker of the House of Commons:
With both candidates polling just above 30%, the winner will likely have to form a coalition with smaller parties in addition to working with a fragmented Parliament, but it’s still worth exploring what their economic policies may mean for the loonie and the Canadian economy more broadly.
Starting with the obvious: the Canadian economy has performed relatively well under Trudeau’s tenure, with unemployment levels near record lows, inflation subdued, and the stock market hitting a record high last month, though GDP growth has moderated to below 2% this year.
Beyond voters’ evaluation of the candidates’ personalities, the biggest policy-related issue will be around the environment. Trudeau has a stated goal to reach net-zero carbon emissions by 2050 and exceed the country’s 2030 carbon emission goals. By contrast Scheer plans to eliminate the country’s carbon tax if elected. Therefore, a victory for Scheer may provide a short-term boost to the country’s economy, and by extension, the Canadian dollar, though the longer-term outlook is more questionable.
Outside of the election, the loonie has also benefited from strong economic data this week, with the private non-farm jobs report coming in better than anticipated (with strong revisions) and a better-than-expected manufacturing sales report. Technically speaking, the loonie has been the strongest major currency year-to-date and peeked out to an 11-week high against the US dollar just yesterday:
Get The App
With the MACD indicator also showing a shift back toward bearish momentum, a confirmed breakdown below 1.3135 in USD/CAD could open the door for a continued drop (rise in the loonie) toward the year-to-date low at 1.3015. Meanwhile, a bounce from this support level, perhaps on the back of a Trudeau victory, could extend into the 1.3200-1.3300 area before encountering meaningful resistance.
With the major candidates polling neck-and-neck on the eve of the election, and a minority government likely in either case, USD/CAD is poised for elevated volatility in the coming week!
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.