The USDCAD pair was rocked by fundamental and political news emanating from both sides of the border and this finally resulted in the pair moving higher through the 1.25 region and now trades strong near 1.2550 as of this writing. It remains to be seen how long this bull run, more of a correction, is likely to last.
CAD On the Backfoot
We have been mentioning over the last few days that the pair would struggle to move higher due to the dynamics in the 2 currencies involved and that any bounce should be used as an opportunity to sell the pair rather than get caught in the warp of buying. Yesterday, the CAD was clearly on the backfoot as the building permits data came in the negative and much lesser than what was expected. Even given the fact of seasonal rise and fall and that we had just been through a very strong winter season, such a low reading was something that was not expected.
This pushed the pair higher through the 1.25 region and then came news that the US could pull out of the NAFTA talks that were currently going on. Though the US sought to deny the development, the developments between the political establishments in the 2 countries in recent times lends credence to this and this further pushed the CAD to the ropes. The pair tried to break through the 1.26 region on these reports but was met by a lot of selling and we continue to believe that the bearish trend in this pair is still intact and it is only a matter of time before the pair starts moving lower again.
Looking ahead to the rest of the day, we do not have any major economic data from Canada but we have the PPI data from the US which could bring in some volatility in the pair and make it an active day of trading.
This article was originally posted on FX Empire
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