Over the past month and a half, USDCAD has climbed steadily, rising by almost 3% and setting its sights on new ambitious goals. The pair is highly likely to continue its relentless rally.
Let’s look at the fundamental picture. The Canadian economy is now looking less resilient than its American counterpart, with a 0.1% slowdown in Q1 GDP growth versus a 1.6% increase in the US. The labor market is not feeling great either. Canada’s May unemployment rate—due today—is expected to show a surge to 6.9%, the highest level since last October.
Another important factor to consider is the northern country’s reliance on exports and commodities. Crude prices have been quite volatile in recent months and are now sitting below the $100-per-barrel threshold. This fact weakens Canada’s foreign trade balance and puts the loonie under pressure.
The current monetary divergence between the two regulators also works in the pair’s favor. The Bank of Canada (BoC) has held interest rates at 2.25% and is projected to keep them unchanged at its June 10 meeting. The Federal Reserve (Fed) remains more hawkish, with borrowing costs at 3.75%. The greenback clearly benefits from this situation.
As you can see, USDCAD has a solid fundamental background. Thus, the uptrend is likely to continue, with the next target at the 1.41400 technical resistance.
The ultimate recommendation is to buy USDCAD at the current price, aiming for 1.41400 within a month. To mitigate the risk of adverse market movements, place a Stop Loss order just below support, at 1.37500.
This content is for informational purposes only and is not intended to be investing advice.
