USD/CAD Fundamental Analysis – week of June 4, 2018

The USDCAD pair had a kind of middling week through the course of the last week as it was caught in consolidation and ranged for the entire week. There was not much by way of data and while the rest of the market was rocked by rise in risks and tension, the CAD did not seem to have been affected too much by it.

USDCAD In Range

Last week, the focus of the markets was on the Eurozone with the political uncertainty and tension in that region contributing to the risk in the markets which caused the stock markets and the euro to crash. But the dollar and the CAD did not seem to be affected much by it and hence, we saw more of consolidation and ranging between the 1.28 and the 1.30 regions for much of last week. This is expected to continue in the short term as the central banks on either side of the border tussle it out in the rate hike race.

The Fed is expected to hike the rates atleast 2 more times during the course of the year though the traders and the dollar bulls would like them rise it for 3 more times. On the other hand, the data from Canada has encouraged the BOC to be hawkish once again and this has led the CAD to strengthen all across the board as the BOC expressed happiness with the growth outlook in their last meeting. The falling oil prices are a hindrance to the outright bullishness of the CAD but we believe that this would only be temporary.

Looking ahead to the new week, the focus is likely to shift away from the dollar as the NFP data from last week gets digested and the CAD should come back into focus with the employment data from Canada scheduled to be released later in the week. If this data comes out in a decent manner, this should more or less confirm the rate hike in June from the BOC and should be bullish for the CAD and push the USDCAD pair back towards 1.25.