The bears have taken full control of the USDCAD pair as the dollar continued to weaken with lack of any respite from the bears in it. The CAD also continued to gain in strength and hold steady and this has made the pair push through the support region at 1.25 and move towards the low 1.24s during the course of the week which points to further weakness in the days ahead.
USDCAD Moves Lower
The dollar had been on the backfoot coming into the week as it had been battered over the last 2 weeks of December. Though there was nothing major fundamentally to warrant such a move and the market still considers 3 rate hikes in the US a real possibility, the traders do not seem to be very confident of the dollar at this point of time and this helped the pair move lower. There was no respite to the selling last week as well as the dollar sold off all across the board and the incoming data also continued to be wobbly. The PMI and the AD employment data came in stronger than expected but the NFP report came in weaker which kept the dollar on the backfoot.
On the other hand, the CAD was helped by the strength of the oil prices which continued to trade in a strong manner and it points to further gains in the oil prices as well as increased strength in the CAD. The Canadian economy depends a lot on the strength of the oil prices and hence, as long as the prices are higher, the CAD is likely to be well supported. The CAD was also buoyed by strong incoming data as the employment report and unemployment data both came in better than expected.
Looking ahead to the coming week, we can expect more pain for the bulls in the pair as the weakness in the dollar strength shows no signs of respite. This, combined with the strength of the CAD, has acted as a double whammy for the bulls and with the pair breaking below 1.25, it has made the situation only worse. We have the inflation and the retail sales data from the US in the coming week which is likely to provide the only respite for the dollar, if it comes out in a strong manner.
This article was originally posted on FX Empire
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