Though the USDCAD pair has managed to recover slightly during the course of the morning, it is clear which way the trend is, for the short and the medium term. The pair is under extreme pressure both due to the weakness of the dollar and due to the strength in the CAD and this is the combination that is feared by the bulls in the pair. On the other hand, we have the oil prices recovering as well and this has placed additional pressure on this pair and it is clear why the pair has been on a confirmed downtrend ever since the pair broke through the 1.35 region.
USDCAD Continues to Remain Under Pressure
The weakness in the dollar is due to the administrative muddle that the Trump team is in and also due to the incoming data from the US which has not inspired confidence among the dollar bulls over the past couple of months. The Fed seems to be confident that the economy and the data will recover soon but so far, there have been no signs of it and the incoming data during the second half of the week will tell us whether the confidence of the Fed will be proven true or not. Also, the Trump team has been unable to push through the healthcare reform bill quickly, with the people within their own party opposing many clauses in it, and this has raised doubts on the fate of other important plans of the team, including the tax cut plan. This has placed the dollar on the backfoot.
On the other hand, the Canadian economy is flying high with the data from Canada continuing to show some very strong numbers. This has prompted the BOC to be bullish about the economy and speak about a reversal in the rate policy which would mean that the BOC would be on hold for a few months before deciding to hike rates later. This is bullish for the CAD and that is why it has been moving higher all across the board. It has been further helped by the recovery in the oil prices which has helped to strengthen the case of the CAD.
Looking ahead to the rest of the day, we do not have any major news from Canada and we only have the ISM Manufacturing PMI data from the US and so, with far more important data ahead in the week, we can expect some consolidation and ranging on either side of 1.30 during the course of the day.
This article was originally posted on FX Empire