USD/CAD Fundamental Analysis – week of August 7, 2017

The USDCAD pair had a pretty strong run for much of the week on the back of a recovery in the dollar. Though the recovery in the dollar happened for much of the week and was felt all across the board, nowhere was it as profound as seen in the USDCAD pair. After the large fall that we have been seeing in this pair, it was only natural for the pair to have a bounce and it happened this week.

USDCAD Bounces Hard

The bounce in the pair was also helped by the slight weakening in the oil prices which is expected to have an effect on the CAD value as the economy depends a lot on the oil prices. Though the oil prices were strong in the early part of the week, the inventory data, which showed a much bigger build up in the inventory in the US, pushed the oil prices lower and this also seemed to have an effect on the CAD which weakened as a result.

Also, it is only natural for there to be a correction in the prices as part of any trend and this bounce should be viewed only like such. The major part of the bounce happened before the employment data from the US and Canada on Friday and this set up the market for the data release. The employment data from Canada came in as per expectations while the NFP came in stronger at 209K but the data did not have as much impact as it was expected to have.

Looking ahead to the next week, we do not have any major news from Canada while we have the CPI data from the US late in the week. We continue to believe that the pair is in a downtrend and that the pair is likely to move lower as the economic data from Canada is simply too strong and they are only just beginning on their rate hike cycle while the US is half way through it and they find themselves struggling to keep pace with these hikes.