After threatening to break through higher in the middle of the week, the USDCAD pair settled lower for the week in what turned out to be a volatile period for the pair. The pair has been in a consolidation and ranging mode over the last few weeks and for a brief while last week, it did seem that the bulls had finally found a break through as the pair made its way through the 1.28 region on the back of dollar strength and CAD weakness.
USDCAD Fails to Breakout
The dollar strength came about due to the smooth passage of the tax reform bill through the Senate and it looks as though Trump would finally have his way as far as the bill is concerned. This helped the dollar to grow in strength and we saw the CAD come under pressure due to weak oil prices. There was talk that the OPEC producers may not extend the production cut and this led the oil prices to move lower. But the OPEC meeting concluded with the announcement that the cut was extended for 9 more months.
This helped to strengthen the CAD and we had also warned about the breakout saying that it lacked the momentum that is associated with a normal breakout. This turned out to be true as the employment report and the GDP from Canada came in stronger than expected and this pushed the pair lower and back into range and it closed the week almost at the same price where it began and looking bearish.
Looking ahead at the upcoming week, we are going to see all the focus being on the dollar with the tax reform bill continuing its passage and the NFP and ADP employment reports also adding to the mix. We believe that we might see some dollar strength as we move into the last month of the year and this is likely to keep the pair within range.
This article was originally posted on FX Empire
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