USDCAD fell hard during the course of last week, in line with the weakness in the dollar across the board. It was actually not much of a surprise though the timing and the speed with which it happened might have come as a bit of a shock to many. The writing was on the wall as far as the pair was concerned and this was clear for the past few weeks, ever since the 1.35 region was broken on the back of news that the BOC was looking to reverse its rate policy.
USDCAD Plummets on CAD Strength
It is to be noted that this fall was not only due to the weakness in the dollar but also due to the increase in strength in the CAD. The increase in strength in the CAD came about due to hawkish comments from the BOC leaders who continue to hint that they were looking to reverse their rate policy from over the last couple of years. This is a clear signal that there would not be any more rate cuts and that the BOC is likely to hold rates in the near future and then look to hike the rates towards the end of the year. This is in line with the improving economy as it is clear from the incoming data. The data has been strong over the last few months and is a clear sign that the economy is moving to a position of strength.
Also, over the last week, we saw that the oil prices began to steady itself after plummeting towards $42 in the previous week. The concerns over supply was said to be the main reason for this and this price helped to support the CAD. This helped the USDCAD pair to push through the important support at 1.32 during the course of the week and once that region was cleared, it was an easy path towards 1.30 and the pair has closed below that to end the week showing further weakness ahead.
Looking ahead to the next week, it is the new week of the month and so we have a slew of data from many countries including the trade balance and employment data from Canada and the FOMC and NFP from the US. The upcoming data would be watched very closely for evidence of continuing Canadian economic strength and also to see whether the data from the US gets better with time, as the Fed had hoped for.
This article was originally posted on FX Empire