After promising a lot and threatening to blow through the 1.26 region, the USDCAD pair has corrected lower over the last 24 hours and it trades weakly above the 1.25 region as of this writing. We had mentioned that a combination of the dollar holding steady and the CAD on the backfoot due to the bad incoming data had given a relief to the bulls.
USDCAD On the Backfoot
We had also mentioned that this relief was likely to be temporary as the CAD would return back to its original strength and the dollar would be thrown on to the backfoot and some of that managed to happen yesterday. It was the overall weakness of the dollar over the last 24 hours that has pushed the pair lower during this period and this is likely to last for the short term. The oil prices continue to hold near the highs of its range and this has continued to help the CAD.
The CAD was thrown on the backfoot due to a combination of bad economic data, in the form of weak building permits data, and also due to the reports that the US would be pulling out of the NAFTA talks. The US denied it and so far, those developments continue to stand as such and that is why we are seeing the CAD regain back some of its strength over the last 24 hours. The pair trades just above the 1.25 region as of this writing but we continue to believe that the downtrend is still intact.
Looking ahead to the rest of the day, we do not have any data from Canada but we have the retail sales and inflation data from the US which are the 2 most important piece of data after the employment data. This is likely to be viewed very closely by the market for any kind of improvement and if yes, there could be another temporary bounce in this pair.
This article was originally posted on FX Empire
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