USD/CAD Fundamental Analysis – week of September 4, 2017

It was a week when the dollar made an attempt to mount a challenge against the CAD but the fundamentals were stacked too much against the dollar and too much in favor of the CAD that the challenge turned out to be a damp squib and the pair ended the week at the lows of the range that promises more pain for any existing bulls in the pair. We have been tracking this pair very closely and correctly over the last several months and we have changed our outlook to bearish on this pair with no reason to change that outlook as of now.

USDCAD Continues Downtrend

The week started slowly for the pair as the dollar and the CAD were locked in a battle for supremacy at the lows of the previous range at around the 1.2460 region and this continued for a couple of days when the trading turned choppy and we exited the market looking for clearer direction. The strong GDP and ADP data from the US helped the dollar to recover and this helped the pair to push through the 1.25 and 1.26 region again and threaten a strong bounce.

But this was shortlived as Canada also threw up a very strong GDP data and this helped reverse the bounce and pushed the pair back to its range lows. A weak NFP report from the US on Friday basically broke the back and the pair broke through the 1.24 region and ended the week slightly below that. In the coming week, the pair would look to continue the downtrend as the weakness in the US economy and the strength in the Canadian economy is clear for everyone to see.

Looking ahead to the coming week, we have the BOC rate decision and the rate statement and the markets expect the BOC to hold the rates for now. But the incoming data from Canada has been quite strong of late and this could encourage the BOC to go in for a rate hike pretty soon and hence the market would be watching out for the tone in the statement to look for hints on when the next rate hike from Canada would be. A hawkish BOC would be helpful for the downtrend in the USDCAD pair to continue.