USD/CAD gained 1.4% last week and Friday’s end at 1.3388 was the highest conclusion since August 3. Agreement between the technical and fundamental outlooks for the loonie is likely to produce further gains in the week ahead, in the opinion of FXStreet’s analyst Joseph Trevisani.
“The prospects of renewed lockdowns in the UK and perhaps on the continent, though not in Sweden which practiced a far less restrictive approach to the pandemic, have the potential to inflict serious pain. With European economies barely recovered from the original closures, the rancorous Brexit negotiations pending and the ECB at maximum rate support, the options for reviving growth are limited. The currency markets are beginning to notice the current and future disparities with the US and the rest of the globe.”
“The descending channel had held sway for six months after the panic high of 1.4537 in the USD/CAD on March 19. The gradual filching of the dollar premium took until the end of July and the mid-August drop to levels below those of the onset of the pandemic was a logical continuation of the trend even though unsupported by any fundamental economic difference between the US and Canada.”
“The USD/CAD has reached the first Fibonacci retracement at 23.6% of the March to September overall decline but that is unlikely to be the finish. In historical terms at least 50% return moves are common and that line at 1.3778 and the 61.8% at 1.3951 should be considered targets for the next few months.”
“The immediate goal will be the resistance line at 1.3460 which marks the lower limit of the range from the middle of June until the third week of September.”