USD/CAD Fundamental Analysis – week of October 24, 2016

USDCAD finally managed to break through 1.3300 and managed to stay above this mark at the end of the week which should confirm that we have finally had a clean break of this price, something that we have been expecting over the past 2 weeks. We have been forecasting an uptrend in this pair for long and said that the larger range was between 1.2800 and 1.3300 and that it was only a matter of time before the range top was broken and thats what we have now.

The trigger for the break was the retail sales data released on Friday which came in at a poor 0.0.% while the expected value was 0.4% but the seeds for the move was sown by the BOC Governor Poloz at the press conference that he attended after the release of the Canadian rate statement. He had mentioned the continuing fall in exports and its impact on the Canadian economy and also mentioned that the members of the BOC did discuss about an easing in the rates. The market wasnt ready for a rate cut anytime soon and this statement from Poloz made the market realise the weakness in the Canadian economy and real possibility of a rate cut from them in the coming months.

With the US Fed expected to hike its rates in the coming months and the BOC looking to cut rates, the gap between the USD and CAD is only expected to get even bigger and the low oil prices are also expected to weigh on the Canadian economy. These are reasons enough for the market to push USDCAD towards its highs in this long term uptrend and this is why we have been forecasting the same. The initial target is 1.35 while the medium term target remains at 1.40.

In the coming week, we have a speech by Poloz, the crude oil inventory from the US and the advance GDP from the US, all of which are expected to affect this pair. There is no specific economic news to be released from Canada in the coming week but with the break of the range top at 1.3300, we believe that the uptrend is confirmed and the breakout can be traded in the direction of the uptrend.