The USDCAD pair had a choppy week but ended it on the backfoot which should serve as an encouragement for the bears in this pair for the coming week. The week began with some choppy trading which led to some strength in the dollar during the middle of the week as the tariff plan from the US was watered down with exemptions for Canada and Mexico as well.
USDCAD Ends Week Lower
In fact, this watered down version of the tariff plan that was signed, served as a boost for the CAD as well as Canada was given some major exemptions in this plan. This happened during the middle of the week as the market awaited further news from both the US and Canada. The market has already priced in a rate hike from the Fed in March. Also, we had mentioned that technically, the pair was moving towards a resistance region above 1.29 and hence it was likely that there was going to be a correction.
This turned out to be true despite the strong employment data, in the form of NFP, from the US late in the week. But the dollar suffered as the average wage earnings dropped and this was an indication that most of the jobs that were added were the lower end jobs which did not add much value to the economy as a whole. On the other hand, though Canada added employment that was less than what was expected, the unemployment rate dropped which was a positive sign for the CAD. Also, the BOC does not need much push for rate hikes as it is known to be a very hawkish central bank. Due to these developments, the pair corrected further below and it finished the week just above the 1.28 region.
Looking ahead to the coming week, we have the inflation data and the retail sales data from the US and the market would hope that these data would continue the trend of strong incoming data from the US which should keep alive its hopes of more than 3 rate hikes during the course of this year. We also have a speech from the BOC Governor Poloz, who is generally known to be pretty hawkish. The direction for the short and medium term is not yet very clear and it is hoped that the coming week would help the traders to decide whether the current move lower is a correction at the resistance region or a reversal.
This article was originally posted on FX Empire
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