USD/CAD Daily Fundamental Forecast – January 12, 2017

USDCAD corrected some more yesterday as the dollar was weak across the board post the press conference from the US President elect Trump. It was generally expected that Trump would deliver a strong speech asking people to unite and help the US grow and also give hints on what his economic, fiscal and foreign policy would be, going forward. But the speech and the following press conference contained none of these and it was generally a large disappointment for the markets in general and the dollar in particular.

The stock markets managed to recover by the end of the day but the dollar could not. Also, the oil prices posted a recovery as well, yesterday and this helped to support the CAD and a combination of these 2 factors managed to push the USDCAD pair below 1.3200 and it now trades below 1.3150 looking pretty weak. The Canadian data over the last few weeks have also come in very strongly, contrary to expectations, and this along with the rise in oil prices is likely to keep the CAD well supported in the short term. With this in mind, and with the dollar weakening across the board, we could see a test of 1.3000 pretty soon. It is important for the dollar to post a recovery quite quickly else the test of 1.3000 could lead to a break of that region and that will place our medium term target of 1.4000 in jeopardy. On the other hand, a test of 1.3000 could provide an ideal opportunity to go long on this pair with a small stop loss.

Looking ahead to today, we do not have any major economic news from the Canadian region and we have the unemployment claims data from the US close to the NY session. But the after-effects of the Trump conference are likely to be felt today as well and this is likely to keep the pair highly volatile and probably quite weak as well.