USD/CAD Daily Fundamental Forecast – January 10, 2018

The USDCAD pair continues on its recovery mode as it trades above the 1.2450 region as of this writing. This is likely to continue in the short term as the dollar manages a short term bounce. But as we have been mentioning in our forecasts over the last couple of days, this bounce is likely to be sold into and this is likely to happen in the 1.25 region.

USDCAD Continues to be Choppy

The 1.25 region has acted as strong support and there was a period when the pair was moving between the 1.25 and 1.28 region and we felt that it could be moving in this range forever. But over the last couple of weeks of December, the dollar began to weaken and the bears in this pair pounced on this opportunity and managed to push the prices lower during this period and through the lows of the range. Ever since then, the 1.25 region acts as the ceiling and we are likely to see this continue in the short term.

Though there has been a slight recovery in the strength of the dollar, the strength of the oil prices has basically negated much of the impact of the dollar strength as it has helped the CAD to maintain its steadiness. Also, looking at the incoming data from Canada, it is clear that it is well on its way to recovery and it is likely that it would be able to sustain even another rate hike which might be soon along the way and which is being partially priced into the markets.

Looking ahead to the rest of the day, we do not have any major news from the US or Canada and so we can safely expect some choppy trading below the 1.25 region and as said earlier, any bounce in the prices should be viewed as an opportunity to go short on this pair.