Oil has slumped significantly this week and this has seen renewed weakness for the CAD. The Bank of Canada (BoC) also released its latest business outlook survey which showed some signs of concern. Inflation expectations for Canada are in the bottom half of the BoC’s target and this will remain a concern. Oil is being hurt by signs of rising US oil production and a growing possibility of a nuclear deal between Iran and the West.
The struggling Chinese economy is also weighing on commodities demand and the recent failed efforts to resuscitate the economy are a real concern. USD/CAD traded at $1.2665, highest since April 2015 and is now eyeing March 2015 highs just above $1.2800. Pair has rallied for eight consecutive days with strong momentum going through the system. I feel traders could take advantage of this momentum and target $1.2800 in the near term.
On the calendar we have Canada’s trade balance and the US trade balance as well. This could cause some near term volatility.