USD/CAD Fundamental Analysis – week of June 19, 2017

It was a very bearish week for the USDCAD pair and the pair closed way down for the week with no sign of any respite. For long, the pair was dominated by the moves in the dollar and the oil prices but last week was all about the Canadian economy and its effect on the CAD which managed to strengthen all across the board over the course of the week.

The trigger for this fall came towards the beginning of the week when Carolyn Wilkins, who is viewed as No. 2 in the BOC, said that she thinks that the rate cuts that have been done by the BOC have served their purpose and that the BOC would start looking for a change to that. This is a very clear signal dropped by her that the BOC is looking to reverse their rate policy and start looking seriously at rate hikes in the near future.

USDCAD Crashes Through on Rate Hike Fears

The market was caught totally unawares as many in the market did not even realise that she was expected to speak on that day. This led to a huge reaction in the markets and the USDCAD pair fell through the strong support region at 1.3400 and for the next couple of days, the drop in the pair continued. The steady oil prices helped to strengthen the CAD further and as more and more traders realised that they could be wrong about the CAD, they began to exit and the fall became more and more and it went as low as the 1.3160 region before a small bounce pushed the pair above 1.32 to end the week. As we had mentioned during the break of the support in the 1.35 region, the trend has turned clearly bearish.

Looking ahead to the coming week, we have the retail sales and CPI data from Canada and that is likely to come in stronger to confirm that the Canadian economy has indeed turned around and if the data does come in stronger, then we should see the USDCAD pair moving towards the round figure of 1.3000 in the coming week.