USD/CAD Daily Fundamental Forecast – August 22, 2017

The USDCAD pair continues to trade in a weak manner as the oil prices were steady to high during the course of last week. The CAD being strong when the oil prices are steady and strong is something that is easy to understand. But it has to be noticed that the oil prices fell by 2% yesterday and even then the CAD continued to remain strong and the pair continued to trade near the 1.2560 region.

USDCAD Likely to Continue Downtrend

A break through the region will confirm that the correction of the downtrend is complete and that would mean that the correction was only 400 pips out of a total fall of 1400 pips so far in the downtrend, again an indication of the strength of this trend. We could see the USDCAD pair move in a decisive manner today as we await the retail sales data from Canada. This is an important piece of data for any country and with the BOC continuing to be hawkish about the economy, this piece of data will tell us whether they can continue to be so.

We are also hawkish on the oil prices in the short and medium term and we believe that the strong oil prices will support the CAD in the medium term as well. Thats why we have been saying all through the time when the pair was moving up that this was only a correction of the downtrend and that the downtrend would resume sooner than later.

Looking ahead to the rest of the day, we do not have any major news from the US while we have the retail sales data from Canada which would be watched closely as described above. It remains to be seen how the market reacts to the incoming data and whether it is likely to continue the downtrend that the pair is in.