USD/CAD Fundamental Analysis – week of January 16, 2017

USDCAD had a pretty volatile time last week as it tested both the highs and the lows of its range though it fell back towards the lows of its range towards the end of the week. The pair began the week strongly as fears about oil prices and the production cut deal pushed the oil prices lower and weakened the CAD but then dollar suffered a large bout of weakness once Trump chose to open his mouth.

Trump addressed a press conference, his first one since last July and that was enough to cause chaos in the markets. The dollar was well supported before the press meet began but once it was clear that Trump did not have any vision for the economy of the country and it was more about himself and his business, it weighed on the dollar and after a long time, the balance between the CAD and USD fell off. This pushed the pair lower as the USD fell across the board and the pair crashed through 1.3200 and then 1.3100 and fell as low as 1.3080 which is a region of strong support. But as is usual with this pair, it quickly bounced back above 1.3100 and it lies above this figure to close the week. We believe that the region between 1.3000 and 1.3100 should be strong support and as long as the pair trades above this, we continue to aim for 1.4000 as medium term target.

Looking ahead to the coming week, we have the BOC rate statement and monetary policy statement and also the adjoining press conference. We also have manufacturing sales and retail sales data from Canada coming in and these should be enough to bring in a lot of volatility in this pair. We do not expect the BOC to change the rates but the accompanying statement should give clues on their thoughts about the economy. The recent data from Canada have been quite strong and this should make the BOC confident and so we do not expect it to indicate any changes in rates for the near future and this should be supportive of the CAD.