On Thursday, we got the much needed bounce in the USDCAD pair, something that we had been mentioning since the beginning of the week. It followed the fact that the pair had fallen a lot over the last couple of weeks and also due to the fact that the pair was in a strong support region and probably a region which would be the last stand for the buyers if they had to make their presence felt. The recovery in the dollar strength helped in the move up and also promised a lot in the coming days.
USDCAD Back to Where it Started
But we had already warned that the downtrend was still very much intact and that it would only be a matter of time it returned. We also mentioned that the bears would be using any bounce in the pair as an opportunity to sell at higher prices and thats what we saw on Friday as any signs of recovery in the pair was dashed once and for all and the pair now looks as weak as ever.
The trigger for the fall came from the GDP data from both the US and Canada. Though the data from the US came in slightly better than expected, the trong data from the US on Thursday had led the markets to expect a lot more from the GDP. Also, the GDP data from Canada came in much stronger than expected which showed that the economy of Canada was very strong and capable of sustaining another rate hike pretty soon. This led to the reversal of the entire move from the previous day and the pair is back in the low 1.24s and looks as though it would weaken more.
Looking ahead to the rest of the day, we do not have any major economic news from Canada or the US and so we can safely expect some consolidation and ranging though the dollar is likely to be on the backfoot due to the developments in the White House over the weekend. Expect the USDCAD pair to continue under pressure as the markets await a slew of data in the later half of the week.
This article was originally posted on FX Empire