The USDCAD currency pair again reached a six-month high yesterday. The uptrend, which started in early August, remains. Meanwhile, the correction that took place last week helped to leave the technical indicators from the overbought. Thus, the way for further growth of USDCAD quotations is still open. After Thursday's strong rise, the bulls may take a break today, but they will surely test the levels above 1.37 in the future.
The strong economic data still supports the American currency. Yesterday's weekly statistics reflected a decrease in the number of new jobless claims to 216,000. It’s the lowest level since March. At the same time, labor cost growth accelerated from 1.6% to 2.2%, confirming the need to maintain high-interest rates in the U.S.
At the same time, the Bank of Canada is under increasing pressure to end its monetary tightening cycle. Before the meeting of September 6, the prime ministers of four provinces wrote open letters to Bank of Canada Governor Tiff Macklem urging him not to raise rates.
Macklem and his colleagues deny in every possible way that their decision to keep the key rate at 5% was influenced by public opinion. However, officials of the Canadian regulator, in any case, can't ignore the comments of officials accusing them of further worsening the financial situation in the country.
The Bank of Canada's softer stance was evident during the speeches of its governor. Macklem said significant progress has been achieved in fighting with price growth rising despite inflation accelerated in July to 3.3%. According to him, the 2% inflation target is already within sight and will be achieved soon. This could be the reason for the further rise of USDCAD.
It is better to wait for a small pullback of USDCAD quotations to make the trade more reliable. For example, the level of 1.363 might suit to open long positions.
The following trading strategy might be suggested:
Buy USDCAD near 1.363. Take profit — 1.373. Stop-loss — 1.357.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.