Bias: Bearish-to-range-bound, as the CAD is currently below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Bank of Canada has lowered its interest rate, which tends to weaken the CAD compared to the PBOC's more stable policy approach.
- Risk/commodities: Rising oil prices, now above average levels, could help support the CAD, as Canada's economy benefits from increased oil revenues.
- Macroeconomic stability: The Chinese government is implementing measures to stabilize the yuan, proving effective so far despite recent weakness against the USD.
Range: The CAD/CNY pair is likely to drift within its recent range as both currencies face opposing pressures.
What could change it:
- Upside risk: A significant recovery in global oil prices could strengthen the CAD against the CNY.
- Downside risk: Further increases in Canadian unemployment could weigh on the CAD, pushing it lower against the CNY.