The USDCAD pair seems to be gathering some strength as the end of the month is over and done with. We head into a new month and with the trade positioning and the month end flows out of the way, it is now time for the traders to focus on the new month. It is likely that the dollar would be the center of attraction in the short term.
USDCAD Shows Some Strength
Yesterday, we saw the first signs of gather strength in the dollar and this was helped by the fact that the ADP employment data came in stronger than what was expected. This led to some strength in the dollar and this was followed by the FOMC meeting minutes later in the day which further helped the dollar to an extent. Though the minutes did not add anything new that the market did not know from earlier, it did not sound dovish and that was a relief for the dollar bulls.
They showed their relief by buying the dollar to an extent and this led to a brief recovery in the dollar. But for the recovery to continue, it is important that the incoming data over the next few days continues to support the dollar. We have the NFP data coming in tomorrow and this is likely to have a profound say to the direction in which the Fed is likely to think. It is clear that the Fed would be looking to start its rate hikes from March but it is important that the data supports these decisions. The market hopes that the Fed would be able to hike the rates more than 3 times this year and the dollar has been strengthening on this anticipation.
Even the pickup in the oil prices has done little to support the CAD as the USDCAD pair looks to recover all its losses and continues to trade in a strong manner. There is not much by way of economic data in the US and Canada for the day today and hence we are likely to see the anticipation grow for the data tomorrow.