USD/CAD Fundamental Analysis – week of August 28, 2017

The USDCAD pair continues its dowtrend and this trend seems to be set for the short and the medium term as well as there does not seem to be any end in sight. Even last week, the pair continued to move lower as the dollar was choppy and the CAD continued to remain steady during the course of the week and the stronger oil prices also helped to keep the CAD supported largely. This helped the pair to move through the 1.25 region and continue lower.

USDCAD Looking Much Lower

The week was largely uneventful for the most part as the dollar was choppy and the market did not want to commit itself in any specific direction till the meeting at Jackson Hole ended. So, we continued to see consolidation in the markets but in the case of USDCAD, we saw a bearish kind of consolidation. We had been saying many times over the last couple of weeks that the bounce from the 1.24 region was only a correction of the downtrend and that it was only a matter of time before the downtrend returned.

This was based on the fact that the dollar continued to be weak due to the lack of support from the incoming data and also from the Fed. Yellen also did not support the dollar as she refused to touch upon the monetary policy during her speech on Friday and this weakened the dollar further. This pushed the pair towards the lows of its range and this is the region from where it had bounced by around 350 pips earlier in the month. The CAD continues to be well supported by strong oil prices and also by strong incoming data which is likely to encourage the BOC to consider hiking rates again in the near future.

Looking ahead to the coming week, we have the ADP and NFP data from the US which will be watched very closely by the markets for continued signs of recovery. We also have the GDP data from Canada and we believe that all these data would bring in a lot of volatility and if the data from the US continues to be weak, we could see the lows of the range give way and the USDCAD pair moving towards 1.23.