Expect USD/CAD sellers
The CAD has been strongly supported over the last 24 hours after a bullish shift from the Bank of Canada. The CAD rose by its most since June 2020 against the USD. The Bank of Canada is now the first central bank to exit its stimulus program after it announced that asset purchases would be reduced from $4 billion a week down to $3billion a week. On top of this, the BoC brought forward its guidance expecting an interest rate rise in 2022 vs expectation of rate rise in 2023.
The USD is weak at the moment as the US 10 year yields have failed to rise despite a good run of recent US data including a stronger than expected US CPI print, US retail sales, NFP data, PMI manufacturing and services data. Many analysts and investors still see the medium-term outlook for the USD as bearish.
In these conditions expect USDCAD sellers on rallies.
Key trade risks
Any further rise in Canadian COVID-19 cases will put a strain on this bullish outlook.
Any sharp falls in the oil markets on rising COVID-19 cases will weaken CAD.
If the FOMC meets next week and announce bond tapering, that will support the USD.
High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.