USD/CAD Fundamental Analysis – week of September 26, 2016 – Forecast

It is fascinating to view the weekly chart on any instrument. It is a time to summarize what has happened and also a time to see what will happen in the future. All this can be done in the relative calm of a closed market, away from the hustle and bustle that a trading day provides. It is also the time to count our mistakes of the past week and see how the mistakes can be corrected in the coming weeks. A time to evaluate and a time to evolve. The weekends provide all of these and much more for a trader and investor. And, of course, there is the small matter of taking care of the family as well !

As we look to see what happened on the USDCAD pair last week, the real action, surprisingly came on the Friday and not on the Wednesday when many expected fireworks, post-FOMC. The Fed announcement caused a general weakness in the pair and the pair slowly drifted downwards towards 1.3000 and there was a general feeling that the pair would continue to drift downwards towards 1.28. But then came Friday and along came the reminder that a pair contains 2 currencies and not just one. The retail sales from Canada printed weakly and what we got was a pullback to the top of the range and into the resistance region. The entire grind downwards over the past 2 days was snapped back and the pair made it back to its range top.

So, now the pair is in a region of strong selling and it is important to watch what will happen. We expect the USD to get weaker in the upcoming weak and this may help the pair to stay within the range and help it move downwards. The only Canadian news of note in the upcoming week is the GDP that is scheduled to be released on Sep 30. Apart from that, we have a slew of news from the US though these are not expected to be major market movers. So, for the upcoming week, till the release of the Canadian GDP, we can safely expect the pair to move down slowly back towards 1.3000 if the USD weakens as expected. On the topside, 1.3232 is a reasonable target where we can expect some very strong resistance and also the daily 200 SMA  but, if broken, could lead to a large bull run. We believe that this isnt the right time for the run as yet, though.