The USDCAD pair has bounced off from around the 1.28 region and the strength of the CAD has been short lived so far. The traders were expecting a lot of strength from CAD as the NAFTA agreement seems to be getting a makeover. The traders were expecting a boost for the CAD on this news as this would have helped the Canadian economy but so far, the impact of that has been minimal. We would expect more details to emerge on the arrangement and once that happens, maybe the CAD bulls would come back into the picture.
USDCAD Unable to Generate Downward Momentum
We have also been mentioning of how there have been increasing signs of weakness in the dollar market and we believe that the pricing of the dollar is high at the moment. There might be some unwinding of the dollar long positions as we head into the end of the year and at that point of time we are likely to see the CAD strengthen as well. The region around the 1.28 region would be the line in the sand for the bulls and the bears and this is likely to lead to a battle in that region.
Looking ahead to the rest of the day, we do not have any major fundamental news apart from a speech from the Fed chief Powell. We do not believe that this will have much of an impact on the dollar for the short term as the market awaits further news from the US later on in the week. This is likely to provide the direction for the short term and we are likely to see the CAD gain in strength and the support region around 1.28 region coming under pressure once again if the data from the US is weak. If this region is broken for good, then we are in for a long period of weakness in this pair which should carry the pair towards the 1.25 region in due course of time.
This article was originally posted on FX Empire
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