Canada Markets

Expected U.S. Rate Hikes weighs on the Canadian Dollar

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The spot Canadian dollar gapped lower to close 75 basis points lower against the USD on March 7, reaching the lowest level traded since Nov. 3 or over four months. The most recent CFTC data as of Feb. 7 shows investors increasing the size of their net-short futures position to 33,091 contracts, the largest bearish position held since August 2020. (DTN ProphetX chart)

The spot Canadian dollar shows a bearish gap in trade on March 7, while posting its largest one-day move lower since October 14, 2022. The loonie fell 75 basis points against the United States dollar (USD) to $0.7268 CAD/USD, while reaching its weakest trade against the USD since November 3, or over four months.

Late February trade saw a breakout lower from a range traded since Jan. 9, a bearish breach of the 100-day moving average, a move below the $0.74 CAD/USD level, a breach of the support line drawn from the Dec. 16 low, and a breach of the 61.8% retracement of the move from the March 2020 low to the June 2021 high, calculated at $0.7413 CAD/USD.

Potential support is seen at the Nov. 3 low of $0.7250 CAD/USD and the October low of $0.7182 CAD/USD, the lowest level seen since May 22, 2020. A breach of this level could result in a continued move to the 70-cent level and even the 2020 low of $0.6852 CAD/USD.

The histogram seen in the first study shows noncommercial traders of investors holding a net-short position in Canadian dollar futures since the week ending Sept. 27, while the size of this position has increased to 33,091 contracts net-short as of Feb. 7, the most recent report provided. This is the largest bearish position reported since August 2020. Three weeks of data are missing due to delays by the CFTC, which could point to even further bearish activity by speculative traders.

Today's move was largely due to U.S. Federal Reserve testimony on March 7 that points to a continued need for higher rates to cool the U.S. economy in light of strong economic data. These comments led to a sharp rally in the U.S. dollar index and weakness in crude oil, which also acted as a drag on the Canadian dollar.

On March 8, the Bank of Canada is widely expected to announce a hold on rates this month.

Cliff Jamieson can be reached at

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