USD/CAD Daily Fundamental Forecast – August 31, 2017

A couple of days back, when the USDCAD pair was lounging at the lows of its range, we had warned that it looked like a double bottom and that, though the fundamentals continue to favor a downtrend, we could not be sure of the same unless and until there was a clear break of the lows of the range. We had also advised our traders to stay away from trading this pair as the action was likely to be choppy.

USDCAD Pair Rockets Through 1.26

The traders who took our advice would have been well served as we indeed got a double bottom at the lows of the range and have had a bounce of around 200 pips since that time, over the last 2 days. The catalyst for this move has been the recovery in the dollar strength over the last couple of days and the strong data from the US yesterday which further helped the dollar to recover.

We had the ADP employment report and the Prelim GDP data from the US yesterday and while the employment numbers came in much stronger at 237K, the prelim GDP also came in stronger at 3% and a combination of these data points helped to bring in another round of buying in the dollar which has since pushed the pair through the 1.26 region and it trades just below 1.2650 as of this writing and could well be aiming for the previous range high around 1.2750 in the short term.

Looking ahead to the rest of the day, it is the turn of Canada to give us their GDP data and we have to see whether it continues the trend of strong economic data from Canada that we have been seeing of late. If yes, then we could probably go back to the 1.25 region while a failure in the data to meet the expectations could lead to the USDCAD pair challenging the previous range highs.