USD/CAD range-trading above key support amid NAFTA concerns
James Chen, CMT January 18, 2018 5:41 PM
Despite continued weakness in the US dollar on Thursday, USD/CAD was stuck in a relatively tight range due to hesitancy and uncertainty regarding the Canadian dollar after the Bank of Canada’s rate hike and statement on Wednesday.
Despite continued weakness in the US dollar on Thursday, USD/CAD was stuck in a relatively tight range due to hesitancy and uncertainty regarding the Canadian dollar after the Bank of Canada’s rate hike and statement on Wednesday. Though the central bank raised its overnight rate by 25 basis points to 1.25%, as widely expected, cautionary statements regarding the pace of future tightening weighed on the Canadian dollar.
The Bank of Canada portrayed strong confidence in the Canadian economy and even indicated that more interest rates may likely be on the horizon. At the same time, however, central bank policymakers also cautioned that they were in no hurry to normalize interest rates, and that continued monetary policy accommodation would likely still be necessary for the time being. Key among the BoC’s worries was the future of NAFTA. BoC officials stated that “uncertainty surrounding the future of the North American Free Trade Agreement is clouding the economic outlook,” as concerns over the upcoming NAFTA talks weighed heavily on the central bank’s stance.
USD/CAD in the aftermath of the BoC decision and statement displayed the indecision caused by the central bank’s mixed messages. As of Thursday, this indecision has prompted the currency pair to range-trade in a struggle for direction even as the US dollar continued to suffer from pronounced bearish sentiment. While USD/CAD’s movement will depend to a large extent on how NAFTA talks proceed, the trend for the currency pair continues to be strongly bearish, particularly in light of the exceptional weakness in the US dollar that has prevailed for the past few weeks and months. Any continuation of that weakness is likely to pressure USD/CAD towards a breakdown below key support around the 1.2400 price area. Such a breakdown could prompt a resumption of the bearish trend and potentially a continued slide for USD/CAD down towards the next key support target around the 1.2200 level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.