The USDCAD pair continues to trade in a tight range in what can be interpreted as a consolidation phase before the next move. After falling through the 1.28 and 1.27 region on the back of some serious strength in the CAD, we have been seeing the pair stabilise and consolidate. The fundamentals continue to be in favor of the dollar as the market looks ahead to the next month.
USDCAD In Tight Consolidation
The incoming data from the US has been choppy over the last couple of months but this has not spoilt the hopes of the market that there would be a rate hike in the US in December. In fact, even as late as today, we have had one of the Fed members say that he favors a rate hike in December and 3 more in 2018 and this has led to another round of bullishness in the dollar. So, this bullishness is likely to last in the short term and should help to keep the pair buoyed.
The CAD, on the other hand, is being supported by the oil prices which continue to trade in the highs of its range. Also, the incoming data from Canada continues to be strong and this has helped the CAD to gain further in strength. It remains to be seen whether this will have too much of an impact on the CAD as the BOC has made it very clear that irrespective of how the incoming data is, there is no chance of a rate hike anytime soon.
Looking ahead to the rest of the day, we do not have any major news from the US or Canada which is pretty much expected as it is a Monday. But we should see a bit more volatility from the US as the traders return from their bank holiday. It is a bank holiday in Canada though and hence expect some consolidation and ranging on either side of 1.27 for today.
This article was originally posted on FX Empire
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