The US dollar is on a roll and the Canadian dollar is unable to weather the storm. USD/CAD is trading around 1.0850, the highest level since June 18th.
If we look at the daily chart, we can see that before Dollar/CAD began tumbling down in mid June, it traded in a higher range of 1.0810 to 1.0950 for around a month. The pair is now re-entering this range.
This week is dominated by US related indicators. So far, we had second tier data like the surprisingly strong consumer confidence and the weak pending home sales. The market clearly prefers the glass full and is ready to buy the greenback.
There are optimistic expectations towards the GDP and the Non-Farm Payrolls, as well as predictions that the Federal Reserve will tweak its statement and convey a message of optimism, acknowledging the improvement in the US economy, especially in the job market.
The market may be getting ahead of itself regarding the FOMC statement, which tends to be dovish. A cautious statement may weigh on the US dollar and allow a recovery in the Canadian dollar. Also a strong GDP figure may be positive for the loonie as a strong US economy more demand for Canadian products.
However, a hawkish statement from Yellen and co. together with an OK GDP could send the Canadian dollar further down, especially as the BOC is still looking for a direction.
For more, see the C$ forecast.
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