USD/CAD Daily Fundamental Forecast – February 22, 2018

The USDCAD pair pushed higher as expected as the strength of the dollar continued to rule the markets which has helped the dollar to rebound all across the board yesterday. The bullishness of the dollar has been the general theme in the markets since the beginning of the week and it looks set to continue for the short term.

USDCAD Moves Higher

The market had been buying the dollar in anticipation of the Fed being hawkish in its minutes and that came to fruition yesterday as the minutes came out and there was a subtle message in the minutes which said that the Fed would be looking to hike rates in an aggressive manner in the next few months. The market did not take that message immediately which led the USDCAD pair lower for a brief while and during that period, it looked as though the pair might return back to the 1.25 region.

But the reversal was just around the corner as the pair pushed higher on the back of some strong dollar buying. The market realised that the Fed would be looking to hike rates more than 3 times during the course of the year and that would be contingent on the incoming data. This realisation led to some additional buying of the dollar which led to a clear breakout higher in the pair. This has helped the pair to push towards the 1.27 region during the period and it now trades just below that region as of this writing.

Looking ahead to the rest of the day, the bullishness of the dollar is likely to be the theme of the day. We have the retail sales data from Canada and also the oil inventory data from the US and both of these could help to support the CAD for the short term but any correction in this pair should be viewed as an opportunity to sell the pair.