The USDCAD pair has hit a wall of resistance around the 1.2750 region and the pair has since corrected lower. This has led the pair to make the move below the 1.27 region and it looks as though the pair might consolidate for some time in this region. We believe that this is only a correction and that the pair is bound to move higher in the medium term.
USDCAD Moves Lower
The pair has been driven by a few factors only over the past couple of months. Those factors include the strength of the dollar and the strength of the CAD which has in turn been affected by the oil prices and the incoming data from Canada. While the dollar has been driven by the anticipation over the coming rate hikes, the CAD has been on the backfoot for the past few weeks mainly due to the fact that the incoming data has been week.
The BOC has been doing very well and has been hawkish enough to bring in the rate hikes even before the market is expecting them to happen. But this cannot last long until and unless the incoming data from Canada cooperates and this is what has been lacking in the last couple of weeks. The dollar has been buoyed by a hawkish Fed which indicates that the next rate hike from the Fed could be around the corner and they also indicate that there are quite a few more rate hikes during the course of the year.
Looking ahead to the rest of the day, we do not have any major fundamental or economic news over the day but we do have a couple of Fed members speaking which should bring in a bit of volatility in the pair. This should lead to consolidation on either side of the 1.27 region.