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USD/CAD Fundamental Analysis – week of May 7, 2018

Colin First

The USDCAD pair didnt have much to do over the course of last week and it marked the second week of ranging and consolidation that we have seen in this pair. The pair had broken down through the 1.30 region which established the bears as being in control of the pair and since that time, we have been seeing the pair under pressure.

USDCAD In Tight Range

The dollar continued to strengthen across the board and though the pair was impacted by the strength in the dollar, it has to be said that the impact was pretty much limited for most of last week. The CAD did not gain too much strength as the help from the oil prices was missing but even then, the pair could not make any major moves during the last week and it closed the week just above the 1.28 region. The only major news of note last week was the employment report from the US in the form of NFP data.

USDCAD Daily

This data came in weaker than expected though the data from last month was revised higher. This was a scenario which was exactly the same that we had seen last month as well and the reaction of the markets to this was pretty much muted like last time as well. It is possible that this weakness in the data prevented the dollar from making a large move higher and pushing the pair towards the 1.30 region but this would border on speculation and it is likely that the coming weeks would tell us the exact situation in this pair.

In the coming week, we have the PPI and the CPI data from the US while we have the employment report from Canada. All of these are likely to have a large impact on the pair in the short term. We believe that the dollar would continue to be strong as long as the incoming data does not miss the mark by much. The traders continue to believe that there would be atleast 2 more rate hikes from the Fed and as long as the economic data supports that view, we should be seeing the dollar being buoyed. The CAD could also gain in strength based on the employment numbers and that is why we believe that this pair, among all, is the one that is likely to range and consolidate for much of the short and medium term.

This article was originally posted on FX Empire

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