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USD/CAD Fundamental Analysis – week of December 11, 2017

The USDCAD pair tried to break through the highs of the range once again last week but so far, it has not been able to do so and it ended the week very close to the region which should continue to give some heart for the bulls as they look towards a volatile week next. The pair had moved towards the lows of the range in the 1.26 region on the back of some strong data but as expected, it has bounced off the lows and is back at the highs due to a dovish BOC and some strength in the dollar.

USDCAD Still in Range

The CAD is also on the backfoot as the oil prices have not been as supportive as they used to be. Though the oil prices have not fallen by a great deal, they have not become bullish as well and this is also weighing on the CAD. Last week, it was clear that the dollar was moving from strength to strength on the back of some strong incoming data. The NFP data came in stronger than expected and this improved the prospect of quicker rate hikes from the Fed and this also helped to keep the dollar buoyed.

USDCAD Daily
USDCAD Daily

The tax reform bill continues to be on the agenda and this has also helped to keep the dollar bulls interested. We had said that the dollar is likely to get strengthened in the last month of the year and so far, that has indeed been the case. In the upcoming week, we have the FOMC rate announcement where the Fed is expected to hike rates. Though this is already priced into the markets, this piece of news should keep the dollar strong.

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We also have the PPI, CPI and the retail sales data from the US and a a strong reading on these should improve the changes of a rate hike in the first few months of next year, despite the change in the Fed Chief. It remains to be seen whether this would be so but what all this does guarantee is the fact that there would be a lot of volatility in the coming week as we head into a period of holidays around the globe from the following week.

This article was originally posted on FX Empire

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