USD/CAD Fundamental Analysis – week of April 2, 2018

The USDCAD pair continued to trade within a tight range and consolidated after having fallen on the back of a weak dollar from the previous week. The dollar did recover during the course of the past week but that did not have much of an impact on the pair and all that it managed to do was to help the pair rise from the lows of its range.

USDCAD Back in Range

This helped the pair to move from the 1.28 region and close the week near the 1.29 region but it is still anybody’s game as such. The bulls seem to have lost their momentum when the prices fell through the 1.30 region but the bears have not been able to take advantage and seize control as the pair is back into its usual range which it was in, before the breakout happened in the previous week. The dollar has been well supported by the incoming data and also by the hawkish stand of the Fed which has hiked rates in March and looks to hike rates further.

The market has already almost fully priced in 2 more rate hikes for this year and it looks as though the dollar bulls would hope for some strong data from the US to strengthen their case for more rate hikes this year. On the other hand, the CAD has been able to stabilise due to the strong oil prices and also due to the fact that the data from Canada has also been largely stable. It remains to be seen how long they would be able to manage this.

Looking ahead to the coming week, it is going to be another shortened week and another week where the focus would be on the dollar as we have the NFP data and the wages data from the US that is likely to dominate the market headlines. As we have said earlier, we believe that the pair is likely to receive a boost if the incoming data continues to be strong but this is something that remains to be seen. If the data is good, then that increases the chances for 3 more rate hikes this year but the bulls still have a long way to go.