The USDCAD pair struggled to pick any kind of traction during the last week as the pair could not make it past 1.3000 despite some weakness in the oil prices which was caused by some supply concerns. We had mentioned several times in our forecasts over the last week that the region around 1.30 would be key going forward and it requires a break of this region for the bulls to have any chance of regaining control in this pair.
USDCAD Continues Under Pressure
The pair has been under the control of the bears ever since it broke through 1.35 and since then, the bears have been in a tearing hurry to push the pair lower and they have managed to do that with the help of the strength in the CAD brought about by the BOC, the weakness in the dollar brought about by the weak economic data and the steadiness in the oil prices over the last couple of weeks. The CAD is moving from strength to strength as the BOC has been emboldened by the strong economic data and has made it clear that it is about to end the rate cut policy and this means that the rates would be on hold for the short term and then we could see some rate hikes in the near future.
The dollar has also taken a hit over the last few weeks despite the hike in rates from the Fed. The data from the US has been weak in this period and though the Fed has chosen to ignore it, the market hasnt and the ADP data, which came in weaker than expected, only enhanced the perception. We had a strong NFP coming in but that was fully negated by the growth in the employment in Canada where the employment data also came in much stronger than expected. This caused the USDCAD pair to crash through 1.29 and end the week below that and it is likely to continue weak in the short term.
Looking ahead to the coming week, we have the BOC rate announcement where the BOC is expected to hike rates. This will be accompanied with a rate statement and a press conference from the BOC that will be watched very closely for hints on further hikes. The rate hike is almost fully priced in and a confirmation of that in the coming week should boost the CAD and push the USDCAD even lower.
This article was originally posted on FX Empire