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USD/CAD Fundamental Analysis – week of February 12, 2018

Colin First
The pair has been trying to build a base over the last couple of days in order to try and move back higher

The USDCAD rose higher during the course of last week on the back of some serious dollar strength and some CAD weakness as well. This was no surprise as the dollar strengthened all across the board and with that happening, there was little chance of the USDCAD pair not responding and moving higher during this period.

USDCAD Moves Higher on Dollar Strength

The dollar has been strengthened due to the strong incoming economic data from the US over the last few weeks. Also, there has been an increasing feeling in the markets that the US and the Fed was trying to keep the dollar weak on purpose as a method of helping their economy. This feeling has increased over the recent weeks, especially with the incoming data not justifying a weak dollar during this period. This led to some dollar buying at the lows which increased as the stock markets around the world began to fall. This led to funds being taken out of the stock markets and pushed into the dollar as a safe haven.

On the other hand, the CAD has been on the backfoot due to the weakness in the oil prices. The oil prices have corrected by one of the largest amounts since the beginning of the bull run over the last few months and this has placed a lot of pressure on the CAD as the Canadian economy depends on the oil prices. The weak incoming data, with the employment data missing expectations by a long shot, only added to the pressure.

Looking ahead to the coming week, the focus would be on the dollar with the inflation data, retail sales and PPI data coming in the forthcoming week. There has been a growing anticipation of further rate hikes from the US and some strong data in the coming week would confirm the rate hike from the Fed in March and also would increase the possibility of more than 3 rate hikes during the course of the year. This could be extremely bullish for the dollar and using 1.25 as the support, we could then see the pair head towards the 1.28 region during the week.

This article was originally posted on FX Empire