USD/CAD Daily Fundamental Forecast – August 28, 2017

The lack of support for the dollar from the Fed is telling on the dollar strength and it is especially strong in a pair like USDCAD which is now back to its range lows after spending a couple of weeks correcting the downtrend that it was in for quite some time. So, over the past 3 months or so, we have had a downtrend that led to a 1400 pips move followed by a correction of around 400 pips and now we are back at the lows.

USDCAD Back at Range Lows

Of course, the bulls would hope that this move to the range lows would serve as a double bottom and help pick up more buyers along the way and then lead to another recovery but the fundamentals from the US and Canada do not yet show any signs of it. The upcoming month is likely to throw some more light by way of incoming data, on the relative strengths of the economies and this should give us a glimpse of the trend for the short and medium term as well.

With Yellen refusing to touch upon monetary policy, it looks as though the Fed is fine with the dollar weakness and this has led to a situation where the dollar is led purely by the incoming data from the US, which has been choppy over the last few weeks. But in the upcoming week, we have the ADP and the NFP data as well and this is expected to give further glimpse into the economy of the US. A turnaround in the economic data would help to strengthen the dollar and this could lead to a bounce in the pair but till that happens, we expect the pair to continue to trade weakly.

Looking ahead to the rest of the day, we do not have any major news from the US or Canada and so expect some consolidation at the lows below the 1.25 region for the rest of the day.