The USDCAD pair suffered due to the weakness in the dollar and the strength in the CAD over the course of last week. This weakness is expected to continue in the short term though we believe that the pair would now shift into a new and lower range over the next couple of weeks or so.
USDCAD Breaks Lower
For long, the region around 1.28 had been the site of many battles between the bears and the bulls and it looked as though the range would continue in the recent times. But that did not turnout to be true last week as the choppiness in the dollar and the strength of the data from Canada from the previous week helped to push the pair lower finally bringing about the breakout. The NFP from the previous week had dipped below expectations while the employment data from Canada had surpassed the expectations by far and a combination of these helped to push the pair under pressure.
Also, the dollar moves were dominated by the fact that the geopolitical tensions around the world and the threat of a trade war all contributed to its weakness. The CAD was not only helped by the employment data but also by the stronger oil prices which also managed to push through the high of its range and seems set to reach $70 in the short term. All these have strengthened the hands of the BOC and it looks as though it will only be a matter of time before we see the next rate hike from them.
The BOC are known to be a hawkish central bank and they would be watching the incoming data very closely to see if the underlying strength continues. In the upcoming week, we have the retail sales data from both the US and Canada and both these pieces of data would be a useful guidance for the respective central banks. We also have the rate announcement and statement from the BOC in the upcoming week and there is a slight chance that they could surprise the markets with a hike. Even if they dont do it now, they are likely to do it by June but the delay could worry the investors and we could then see the pair move towards the 1.28 region.
This article was originally posted on FX Empire
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