Short Term CAD Outlook Dependent on NAFTA Outcome



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Fundamental Forecast for CAD: Neutral

USDCAD Analysis and Talking Points:

  • Short Term CAD Direction Dependent on NAFTA Outcome
  • Bank of Canada Governor Poloz to Emphasis Gradual Tightening

See our Q3 CAD forecast to study what is going to drive the CAD by way of the quarter.

Short Term CAD Direction Dependent on NAFTA Outcome

Headline danger for the Canadian Dollar stays at elevated ranges as Canada seems to succeed in a NAFTA settlement in precept with the US. As such, the near-term route for the Loonie could be very a lot dependent on the end result from the newest NAFTA talks, with an settlement more likely to assist the Canadian Dollar, which might probably see USDCAD retest the latest lows at 1.29. The pattern for USDCAD stays bearish offered the pair holds beneath 1.30 with 1.2850 eyed as the subsequent vital goal. Failure for Canada and the US to succeed in an settlement may see the pair breach the highest of the bearish channel round 1.3110 to make a run in on 1.32.

Bank of Canada Rate Decision

Market pricing for a fee hike at subsequent week’s Bank of Canada fee resolution are comparatively low at 20%, which means that the BoC will maintain off for now (most definitely state of affairs of October fee hike). Alongside this, with Q2 GDP printed roughly in keeping with the BoC’s forecast at 2.9% (BoC exp. 2.8%) and Poloz highlighting on the Jackson Hole Symposium that the enhance in inflation has been resulting from transitory elements, additional means that the Governor will probably emphasise a gradual strategy to elevating charges.

CAD Rate Forecast: Short Term CAD Outlook Dependent on NAFTA Outcome

Canadian Employment Report

Another key danger occasion on the financial schedule for the Loonie would be the newest jobs report on the backend of the week. As a reminder, the prior employment report had proven a strong jobs acquire of 54okay, nevertheless, the parts had been barely softer with the contribution coming from half time jobs. Consequently, given the danger occasions this week, USDCAD 1-week implied volatility are at lofty ranges of round 120pip breakeven.

Next week’s Economic Calendar

CAD Rate Forecast: Short Term CAD Outlook Dependent on NAFTA Outcome

Source: DailyFX


CAD Rate Forecast: Short Term CAD Outlook Dependent on NAFTA Outcome

Chart by IG

USDCAD Technical Levels

Resistance 1: 1.3115 (23.6% Fibonacci Retracement)

Resistance 2: 1.3180-1.32 (Resistance Area)

Support 1: 1.2940-50 (Support Area)

Support 2: 1.2900 (Weekly low)

Support 3: 1.2875 (200DMA)


— Written by Justin McQueen, Market Analyst

To contact Justin, electronic mail him at [email protected]

Follow Justin on Twitter @JMcQueenFX

Other Weekly Fundamental Forecasts:

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Japanese Yen Forecast – USD/JPY Initiates Bearish Sequence Amid Failed Run at August-High

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British Pound Forecast – Sterling Dips Look Attractive After Brexit Breakthrough

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Gold Forecast – Gold Prices Primed for Seasonal Strength, NFPs on Tap

Australian Dollar Forecast – Australian Dollar Unlikely To Get Much Lift From Crowded Data Week


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