USD/CAD Daily Fundamental Forecast – August 18, 2017

The USDCAD refuses to buckle down as it popped right back up yesterday despite the weakness and the choppiness in dollar trading across the markets yesterday. We had mentioned that the region around 1.2660 is likely to be very crucial in determining the next short term direction of the pair and that a break through this region was important for the downtrend to resume further.

USDCAD Bounces Back

The pair did break through this region a couple of days back which confirmed the resumption of the downtrend and true to that, the pair moved below 1.26 for the first half of the day yesterday. But the pair managed to bounce back in the later half of the day as the weaker oil prices seem to be having an effect on the strength of the CAD and slowly but steadily, the pair rose through the course of the day and finally managed to crack through the 1.2660 region and it trades there as of this writing with it being indecisive on which way it wants to go.

We continue to believe in the downtrend in this pair as we think that the fundamentals continue to be highly skewed in favor of the CAD, with the BOC sharpening its knives for the next rate hike and the Fed still undecided on what it wants to do. So, we believe that this move back through to the 1.2660 region is another retracement which will be met by a lot of selling which should push the pair back towards 1.25 and 1.24 as well.

Looking ahead to the rest of the day, we have the CPI data from Canada for today and we dont have any news from the US. But the increase in global risk and the negative sentiment around the US is likely to weigh on the dollar and if the CPI data comes out strong, we should see the next leg of the downtrend in the USDCAD pair.