USDCAD corrected back some of the strength we have been seeing over the last few weeks as the dollar also corrected all across the board last week. The pair had spent 2 weeks in December near the highs of its range as it was not affected much by the movement in the dollar. But last week, the big traders and the bankers returned to the markets and they began pushing through large orders and this pushed the pair this way and that though the overall trend in the pair over the last week has been downwards.
We have been mentioning that the uptrend in the pair has been quite strong and though the trend is likely to be interrupted by periods of correction, the overall trend remains intact and that every piece of correction is supposed to be used as an opportunity to go long. It is to the credit of the strong trend that despite strong data from the Canadian region last week, where the employment change showed a huge jump, the dollar also continued to strengthen at the same moment and this helped the pair to have a bounce largely shaking off the good Canadian data. The Canadian trade balance was also much better than expected but none of it mattered to the pair and though it crashed below 1.3200 for a brief period, it quickly recovered and bounced back above 1.32 once the wage earnings from the US came out better than expected.
Looking ahead to the coming week, we do not have much economic data from Canada and we will be getting the retail sales and CPI data from the US and we also expect the currency moves to be dominated by the overall trend and the flows. We expect the dollar strength to return in the coming week and if this happens, we are likely to see the pair make a move back towards 1.3500 over the coming week.