The U.S dollar continued to strengthen against the loonie during last weeks trading session after the Canadian Interest Rate was surprisingly to 0.75% from 1.00% cut 2 weeks ago. Moreover, the Canadian dollar was hard-hit after Statistics Canada said the country’s gross domestic product fell 0.2% in November, compared to expectations for a 0.1% down-tick and after a 0.3% gain in October.
Meanwhile, in the U.S economy, the dollar had strengthened broadly on Thursday after the Federal Reserve indicated that interest rates could start to rise around mid-year.
Following its policy meeting on Wednesday, the Fed said it would keep rates on hold at least until June and reiterated its pledge to be patient on raising interest rates, while acknowledging the solid economic recovery and strong growth in the labor market.
Weekly bias remains on the upside as 21 and 55 EMA’s are crossed northward on the multi-time frames. Also SSRC, MACD and RSI oscillators are signalling the commencement of a fresh buy run in the pair. Am expecting further rise to 1.2880 in the medium term picture. However, sustained break will pave the way to key resistance level at 1.3063 (2009 high). Nonetheless, considering that the up trend looks a bit stretched and overbought, break of 1.2603 (Jan 30 low) will suggest short term topping and bring lengthier consolidations first.
In the week ahead, investors will be turning their attention to Friday’s U.S. Non-Farm payrolls report for further indications on the strength of the recovery in the labor market.
Canadian employment data due on Friday will also be in focus.