USD/CAD Fundamental Analysis – week of February 20, 2017

USDCAD continues to trade within a tight range as the pair is unable to make any headway in any of the directions as the bulls and bears are locked in a very tight battle to gain control. Just a few weeks back, it looked as though the bulls were in full control and they could do as they wished to as the prices were above 1.3200 and the corrections were few and far between and the bounces followed the corrections very quickly and strongly. But the situation has changed over the past 2-3 weeks as the support region around 1.3000 has come under severe pressure during this period.

Part of the reason for this is the fact the Canada has continued to throw up some decently strong data over the past couple of weeks while the US has not been showing some great data, especially in those data that matter. Last week, we saw the release of CPI and Retail sales data and though the headline data came out very strong, the wages part of the CPI data showed a large weakness in continuation with the weakness in wages that was seen in the data that was released along with the NFP. This disappointed the bulls and along with the risks and fears surrounding Trump and his team that continues to dominate the markets, the dollar had a tough time last week, similar to what it has been going through over the past few weeks. Though the US investors seem to have largely reconciled themselves to the presence of Trump, the international investors dont seem to be too convinced as yet, especially with his policy of US First. That is the reason that they are reluctant to invest in the US and the dollar and the weakness in the dollar confirms just that.

Looking ahead to the coming week, we have the Retail sales and CPI data from Canada and we have the FOMC meeting minutes from the US, all of which are likely to cause some serious volatility. If the Canadian data continues to come in strongly, then we can find that the bulls are in some real trouble and the support region around 1.3000 could come under some very serious threat and if it breaks cleanly, then we could probably see the reversal of the trend in the USDCAD pair.