The pair continued to weaken during the course of the week as the pair ended the week near its lows in the 1.23 region and it may lead to more pain in the coming days. But on the other hand, we are seeing some first signs of recovery from the dollar in weeks and we have to wait and see whether this would lead to a turn around in the next week.
USDCAD Approaching Strong Support
The pair moved lower mainly due to the weakness in the dollar which has been seen all across the board. This is nothing new and this is something that has been going on since the middle of December. Even the rate hike in December from the Fed did little to help the dollar bulls and last week, the comments from the US treasury secretary was just what the dollar bears needed. He said that he would like to have a weaker dollar as it would help the US economy and trade and this led to a large sell off of the dollar all across the markets.
This was followed by comments from Trump where he sought to play down the weakness of the dollar by saying that he felt that the dollar would be strong due to the strength of the incoming data from the US. This helped the dollar to stage a slight recovery towards the end of the week but with the oil prices continuing to move higher, this supplied enough strength to the CAD to limit the move from the dollar. It is likely to be an interesting week ahead.
It would be the end of the month during the middle of the week and hence we are likely to see some strong trade flows and positioning as well. Towards the end of the coming week, we are also going to have the NFP data as well which would get extra attention due to the comments from Trump. It is the incoming economic data that the Fed is likely to base their decision for a rate hike on and hence with the new Fed Chief assuming charge and with the next rate hike expected in March, this piece of data in the coming week assumes a lot of significance. Usually the employment report from Canada is also released at the same time but it is not so this month leaving the stage to the dollar to be the full focus of the market in the coming week.
This article was originally posted on FX Empire
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