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Last week, the Canadian dollar continued to rally, pushed by a slew of supporting domestic data along with more evidence that the vaccination roll-out in Canada is keeping a high pace. This week will be very quiet data-wise and there are no central bank speakers scheduled. Economists at ING expect the USD/CAD pair to test the 1.20 psychological level.

Loonie is flirting with 1.20

“Inflation rose to 3.4% in April, which is a quite high figure considering the restrictions in place in many parts of the country. Retail sales for March soared past expectations and came in at 3.6% MoM. The data flow has clearly gone in the direction of mitigating the grim jobs numbers for April, and this is ultimately supporting hawkish expectations on the Bank of Canada.”

“External factors should therefore drive the large majority of CAD moves, and leave the loonie more vulnerable to potential unwelcome swings in commodity prices.”  

“USD/CAD is very close to the key 1.2000 support, which may well be heavily tested in a risk-on environment next week.”