USD/CAD Daily Fundamental Forecast – December 28, 2017

The USDCAD continues to trade in a weak manner but we believe that many of the traders are not yet on this train and hence this move needs to be taken with a pinch of salt. Since the beginning of the week, we have been seeing the dollar on the backfoot all across the board and this has been showing up on this pair as well. So, it is no wonder that the pair is trading near the lows of its range.

USDCAD Pair Moves Lower

In fact, the USDCAD pair has been hit with a double whammy as the CAD has also been growing in strength since the beginning of the week. The CAD has been buoyed by the strong data that came in last week with both the retail sales and the inflation data coming in much stronger than expected. This has lent support to the CAD and it is a combination of the strength in the CAD and the weakness in the dollar that has helped the pair to move lower as the bears have been taking full advantage of the low liquidity.

The disadvantage of such moves on low liquidity is the problem that these moves could be reversed anytime. They could be reversed within the next day or so and this is possible as not many traders are around. Also, this move could be reversed when the markets is back to its full strength sometime around the second week of January and this is why it is important to stay away from the markets for now and see how the situation develops.

Looking ahead to the rest of the day, we do not have any major news from Canada or the US and hence it is likely that the pair might consolidation and range with a bearish support. The region around 1.26 should be able to lend some support for the prices and could lead to a bounce.