USD/CAD Daily Fundamental Forecast – June 22, 2017

The USDCAD pair rose as expected but this rise is not only a part of a correction of the downtrend but it looks much more stronger and much more purposeful than just a mere bounce that we were expecting. The latest move up is mainly a reaction to the falling oil prices which continued to move lower during the course of the past 24 hours and that is not good for the Canadian economy in the medium and long term. The economy depends a lot on the oil prices and its fall would place a lot of pressure on the economy.

USDCAD Higher on Weaker Oil Prices

Over the past couple of weeks, the CAD has largely chosen to ignore the falling oil prices as the strength of the CAD was drawn on the fundamentals of the economy and also on the hope that there would be rate hikes in Canada in the near future. But with those factors now priced in and the effect of these events on the prices beginning to wear off, we are seeing the CAD being much more susceptible to the moves in the oil market over the last couple of days. This is why we have been seeing the CAD weakening and the USDCAD pair rising through 1.32 and moving above 1.33 over the course of the last couple of days.

The pair now trades comfortably above the 1.33 region but it is likely to face some strong resistance between 1.3330 and 1.3350 in the short term. With the oil prices having broken through strong support and looking to move lower, we are likely to see the USDCAD pair try and make a move higher. A clean move above 1.3350 is likely to make this bounce much stronger as more and more buyers are likely to join in whereas if the price stays below 1.3350, this move would be viewed as a correction of the downtrend with the pair moving back below in the short and medium term.

Looking ahead to the rest of the day, we have the retail sales data from Canada and the unemployment claims data from the US and therefore, we should be seeing some more volatility for the day especially with the oil prices in danger of falling further.