USD/CAD Fundamental Analysis – week of September 18, 2017

The USDCAD pair seems to be building a nice base for a bounce over the last week or so. Whether this base will lead to a bounce or whether it will lead to another leg of the downtrend is something that we have to wait and see but we have to agree that some signs of life are there in the dollar. Also, the pair is now in a region where a good bounce from here is possible. This is something that we felt when it was in the 1.24 region as well and that led to a bounce of 400 pips.

USDCAD Building a Base

The week was largely uneventful for the USDCAD pair as the pair consolidated and ranged for much of the week. The CAD did not have much news from Canada to support its cause but the strong and steady oil prices helped to support it and helped to keep the bid under it. On the other hand, the dollar was choppy as the data was mixed with the PPI and retail sales data coming in weakly while the CPI data came in strongly.

But with reports of Trump reaching out to the opposition to push his reform bills through and also with the FOMC announcement looming ahead in the coming week, the dollar did pretty much as the investors and the traders did not want to sell too much of the dollar at such an early stage. This uncertainty, is what transforms slowly and surely into a trend and this is why we believe that the dollar has some good chances of recovery from here and the bears need to be careful at this stage as the trading may not be so one-sided after all, going forward in the short term.

Looking ahead to the coming week, as mentioned earlier, we have the FOMC announcement from the US which is likely to keep the attention of the markets for now. The Fed cannot afford to hike rates at this point but the market expects the FOMC to be hawkish and focus on the recovery of the economy and maybe set the timeline for the next rate hike. If this comes out to be true, then we could see some sustained bounce in the dollar which could then push the USDCAD pair through 1.23 and further in the short and medium term.