Forecast on USD/CAD

The Friday report on employment in the non-agricultural sector of Canada was mixed: the unemployment rate declined, the number of employed dropped, the number of full-time employees declined. Nevertheless, after five months of relatively strong growth in the number of full-time employed, this drop is very modest. This week in Canada, there will be no fresh data, so the focus will be the speech of Bank of Canada Chairman Steven Poloz today. If his rhetoric is more "hawkish" than the rhetoric of a monetary policy decision, USD/CAD can quickly reach 1.2700.

The Yen - the greatest winner of future trade wars

Last week, President Trump shook the market with the imposition of imported duties for steel and other products. This immediately triggered talks about potential trade wars that have affected currency markets.
The potential US involvement in a trade war with other countries around the world has led to serious sales of US stock markets.
One currency, however, wins against all the tensions and has seen a serious appreciation over rivals. And that was the yen. According to investors and analysts, however, the appreciation of the yen is just beginning.
These events are largely reminiscent of what happened in the early 1990s when the US took protectionist measures against Japan.
The yen reached a record high of 79.75 yen per dollar in 1995, when similar protectionist actions were taken by the United States.
The proposed tariffs can reduce the US economy's growth by 0.2 percentage points next year, posing additional threats as to how US trading partners will react, analysts at Barclays Plc say.
In search of security, the traders turned to the yen, the Swiss franc and the euro. Trade-sensitive currencies, like the Canadian dollar, also declined.

Chances to raise interest rates in Canada is decreasing

The Canadian dollar declined on Friday against the US dollar after weaker than expected inflation figures in Canada. This reduces, according to market participants, the chances of raising interest rates next month.
Inflation climbed to 1.3% in May, which was below analysts' average expectations of 1.5% and far below the target of the Canadian central bank of 2%.
Food and fuel prices have been the main source of slowdown in consumer price growth in Canada.
According to market observers, the Canadian central bank will find it very difficult to raise interest rates next month, given the data.
Chances to raise interest rates in July declined to just 20%, compared with 33% before the data was published.
According to statements by Canadian central bank's officials this week, the moderate monetary policy of the Canadian central bank has played its role, and the bank is expected to assess whether interest rates should remain at their current record lows.
Interest on two-year Canadian bonds fell by 3 basis points below US ones, or the spread between the two instruments was -43.8 basis points. On Thursday of last week, this spread fell to its lowest value in four months - at -40.8 basis points.

USD/CAD holds above 1.3372 support

The Canadian dollar, paired with the US dollar, is above the support level in the region of 1.3372 dollars. It is also seen a way out of the framework of the downward trend, which hints at further growth in the medium-term outlook to a resistance level of 1.3516 dollars.
But, do not forget that in the frames of speculative trading there can be a move in favor of the Canadian dollar. Now oil prices are strengthening at a steady pace, this, in turn, supports the Canadian dollar. In addition, on Friday, traders will pay attention to the publication of the March unemployment rate of Canada. If the indicator continues to decline, it will positively affect the Canadian dollar in pairs with other currencies.

USD/CAD reduces growth against the background of positive statistics in Canada

On Friday, the US dollar reduced the achieved advantage against the Canadian currency after the publication of positive data on sales in the manufacturing sector of Canada, while the "dovish" sentiment of Fed officials this week continue to put pressure on the US dollar.
During the morning trading on US exchanges, the pair USD/CAD retreated from the session high of 1.3346 to 1.3318, keeping this position during the day.
It is likely that the pair will find support at the level of Thursday's two-week low at 1.3274, and resistance at the high of 1.3402, recorded on March 2.

Canadian dollar rises

On Monday, the Canadian dollar rose against its US counterpart. However, the increase was restrained by lower oil prices and a reaction to the immigration decree of the President of the USA Donald Trump.
USD/CAD fell by 0.13% to 1.3136, near the session low at 1.3118.
US Dollar decreased after the publication of the decree of Trump on Friday, limiting entry to the USA to citizens of seven Muslim countries. This decree renewed concerns about the potentially destabilizing impact of protectionist policies implemented by the new administration.

Trump decree was appealed in court, it caused international criticism, mass protests and chaos at airports.
Another negative factor for the dollar was also a sharp decline in US GDP in the fourth quarter. It would be an argument for the Fed in favor of a more gradual increase in interest rates.

USD/CAD

At the end of yesterday's trading session, Canadian currency suffered significant losses, which couldn't help even the decision of the Bank of Canada to keep the main interest rate unchanged at 0.5%. The pressure on the currency strengthened by regulator's comments regarding the low inflation, as well as the negative effects of the high currency rate with which it's harder to fight for domestic producers. It should be noted that the pair USD/CAD had a reasonable basis for the growth without soft rhetoric of the Bank of Canada. The main reasons due to which the Canadian risks continue to remain under pressure, is the contrast of the monetary policies of the Bank of Canada and the United States, a significant yield spread between bonds of these regions, the probability of keeping the correctional dynamics of the oil market, as well as the risk of revision of NAFTA agreement after Trump will take over as US president. The greatest potential impact on the USD/CAD pair is in the last two factors. Oil has traded in the local minima, and, apparently, plans to continue its downward rally. As for Trump, after the inauguration the market can receive the first signals of implementation of trade reforms, about which so much said Trump during his election campaign.

USD/CAD is stable in low trading activity

The US dollar was almost unchanged against the dollar on Thursday in Canada, as sentiment on the US currency remain, despite the rebound in oil prices supported the Canadian commodity currency.
Trading activity will be low, as US markets are closed on the occasion of Thanksgiving Day.
In early US trade, the pair USD/CAD reached 1.3535, the highest since November 18, the pair subsequently consolidated at 1.3498.
The pair was likely to receive support at 1.3420, Wednesday's low and resistance at 1.3566, the high of November 18.
The dollar was supported against the backdrop of expectations that the presidency of Trump would increase budget spending and tax cuts, which, in turn, will contribute to the acceleration of economic growth and inflation.
Accelerating economic growth and inflation will allow the Fed to continue tightening monetary policy.
Dollar rally was also triggered by rising expectations that the US central bank will raise rates at the meeting on 13-14 December.
Late last week, the chairman of the Federal Reserve Board of Governors Janet Yellen said that the rate increase, "is expedient in the near future."
Meanwhile, the Canadian dollar was supported against the backdrop of rising oil prices on Thursday.
Canadian fell against the euro, EUR/CAD rose by 0.20% to 1.4262.

RBC Capital Markets is waiting for the fall of the Canadian dollar

Currency strategists at RBC Capital Markets said, that USD/CAD has found support above 1.2900 in response to the widespread strengthening of the dollar and the decline of crude oil prices, after data showed an unexpected increase in inventories of raw materials.
Currently, the support is located at 1.2896 and 1.2859, while resistance is at 1.2997 and 1.3084, say analysts from the bank.

I retain my bearish outlook for CAD, but will wait for the technical catalysts for opening positions in the USD/CAD. Traders working in the long term, could play through the purchase of options.