The USDCAD pair seems to have finally reversed course after threatening to move higher through towards the 1.28 region over the last couple of weeks. The reverse in this pair has not gathered momentum and we are rather seeing a slow and steady drop in the pair which is likely to continue in the short term. If this does continue, then we could see the pair dropping back towards the lows of the range at the 1.2070 region.
USDCAD Begins Another Leg Down
The dollar bulls had expected some kind of support from the Fed through the FOMC minutes as the incoming data from the US had failed the bulls since the NFP came in weaker than expected last Friday. Since that day, we have been seeing the dollar moving lower and lower across all the currencies. The dollar bulls were left to be disappointed yesterday as the Fed gave no indication of any hike in the minutes. There was the customary discussion on the economy and the worry about low inflation but there was no hint of any timeline for the next rate hike.
Some of the Fed members continue to claim that there would be one more rate hike this year but so far, this has not been helped by any of the incoming data. This is the reason why we have been seeing the pair moving lower over the last 24 hours and now it trades just below the 1.2450 region as of this writing. The pace of the fall has been quite slow as the CAD itself has to deal with some dovishness on the part of the BOC. The market was hoping for a rate hike from the BOC this year but Poloz put paid to those hopes by saying that he does not have any such timeline in his mind.
Looking at the day ahead, we do not have any major news from Canada for today but we have the PPI data from the US later on today. The dollar bulls have another chance of this data comes in stronger than expected, else we are in for another leg of the downtrend.
This article was originally posted on FX Empire
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