Last week, the pair broke out of its ten-week descending channel on Wednesday and consolidated gains on Thursday and Friday but the larger pattern which goes back to late June remains complete.
The Loonie has rebounded periodically during the long dive only to resume its original direction. The pair has been much lower over the past decade, there was nothing significant about last week’s low close at 1.2631.
Canadian data was thinning this week. Better than expected November GDP, which was the only data of note, gave little or no support to the Canada on Friday.
The West Texas Intermediate (WTI) oil has marked time for three weeks after moving through $52 on January 11. After several attempts at $54, the range has settled between those two reference points. Even though the background assumption is that the global economy will recover sometime in the second quarter, except for US PMI levels, there has been no statistical indication that is imminent. Until those signs begin to arrive, WTI will remain dormant.
The uncertain nature of this week’s pattern break will receive a test on Friday when the US and Canadian job reports are released. Forecasts have Canada losing employment and the US gaining, which, if accurate, would support the USDCAD.
Despite a technical break, the USDCAD is far way from establishing a reversal. The default assumption must be that this is another in the long series of rebounds in a general trend lower.
The US dollar and economy are the drivers of the relationship and for the moment the economic picture south of the border is ambiguous. Though the pandemic seems to have peaked in the US with caseloads and hospitalization declining, it has yet to encourage any sustained economic strength.
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