USD/CAD Daily Fundamental Forecast – July 12, 2017

USDCAD continues to trade within a tight range and consolidate as the market awaits a bunch of data from Canada later in the day today which includes the rate announcement as well. The market, as usual, has overrun the actual release of the rate data and has assumed that the BOC would hike rates and so any change in that could lead to selling of the CAD. Also, the market expects a strong statement to accompany the announcement and so the BOC has a lot to live up to.

USDCAD Awaits the BOC

Yesterday, we saw the dollar weaken due to further trouble for the Trump team and this time, the trouble was not due to Trump Senior but due to Trump junior and his interactions with the Russians before and after the elections. This has led to a kind of political instability in the US, as you would expect, and this is bad for the dollar which has put paid to the hopes of the dollar bulls who would have expected to continue the dollar recover. But the dollar weakness has not affected the USDCAD pair so far and one of the reasons could be the fact that the market would want to see what the BOC has up its sleeve before it begins to move.

The BOC has been stoking the fire and helping the CAD make a bullish move all across the market by maintaining that the Canadian economy is now strong enough to sustain rate hikes. Their words would be put to the test in the evening today as they come out with a rate announcement along with the statement and press conference. The market would expect all of this to be very hawkish to continue buying the CAD while a less than hawkish move in any of these is likely to lead to a bounce in the pair towards the 1.30 region.

The recovery in the oil prices has also helped to strengthen the CAD and with the recovery expected to continue in the short term, we expect the CAD to continue to be well bid in the short and medium term.