USD/CAD Daily Fundamental Forecast – December 06, 2016

As we had mentioned in our forecast yesterday, USDCAD continued to trade weakly through the day yesterday as the dollar was soft due to falling yields and the CAD continued to be strong as the oil prices continue to remain high and trade near their range highs. Both these factors kept the pair under pressure but to its credit, the pair did not fall by much. The pair traded as low as 1.3230 and has since bounced back above 1.3280 and trades in that region as of this writing.

We expect this pair to continue to consolidate and trade weakly within the range as the market factors in the dollar weakness and the rising oil prices. We expect the oil prices to continue to rise after a small correction but with the Fed set to hike rates when it meets during the middle of the month, we could expect the pair to remain supported. This should help to keep the pair above 1.300 and as long as the pair remains above this region, we can safely say that the uptrend in this pair is set to continue in the medium term and we will continue to look at 1.4000 as the target.

Looking ahead to today, we have the trade balance data from Canada and that is expected to come in at -2.1B and this could bring in some volatility in the prices but we expect the consolidation with bearish bias to continue for the rest of the day. Traders would be well advised to let the prices run for the next few days and wait on the sidelines as the bull run in the oil prices gets done and the oil prices begin to stabilise. That would be the ideal time to get in on some longs for the next leg up with a stop loss just below 1.3000.