The USDCAD pair has bounced off from the 1.28 region and now trades very clearly and easily above the 1.29 region as of this writing. The dollar strength has been so strong that the CAD bulls have not been able to do much about it so far. Though the dollar strength has waned a bit across the other instruments, it looks as though it continues to be strong against the CAD. This is logical considering the fact that the NAFTA agreement has been re-negotiated over the last few weeks and it is generally expected to favor the US.
USDCAD Likely to Be Affected by News
The agreement is key for Canada as a large part of the Canadian economy depends on its trade with the US. The US is trying to use this as a leveraging tool to get what it wants out of the agreement. Also, over the last few days, we have been seeing the oil prices showing their first signs of weakness since the beginning of September and this has also added a lot of pressure on the CAD as oil exports dominate a large part of the Canadian economy. A combination of these factors has been pushing the USDCAD higher over the last couple of days and this is expected to be volatile over the coming days as the traders sort out the relative strengths of both the currencies on the back of news that is going to be released over the short term.
Today could be a key day as far as the economic news is concerned as we have the employment reports from both the US and Canada a bit later in the day. The Fed Chief Powell had made clear his intentions of continuing the rate hikes in the coming months but if the data is weak, his hands are likely to be tied. This is what the dollar bears would be hoping for while the employment report from Canada is also likely to be an important indicator of the state of their economy with the uncertainty over the impact of the NAFTA agreement still looming ahead.
This article was originally posted on FX Empire
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