USD/CAD: Economic recovery pace quickens, loonie to inaugurate a trend lower

The loonie has been trading between 1.30 and 1.34 in the past two years and without a clear trend, USD/CAD may push to the downside following outstanding economic data, Joseph Trevisani, analysts at FXStreet, reports. 

Key quotes

“The immediate question for USD/CAD traders is with the US dollar risk-premium deleted and both central banks firmly fixed to a 0.25% base rate where the market will turn for differential analysis.”

“Technically, the area between 1.3400 and 1.3000 is heavily populated with the almost two years’ worth of trading (June 2018-March 2020) and without clear fundamental direction the USD/CAD will be hard-pressed to inaugurate a trend lower after deserting the panic of the last three months.”

“A quicker US than Canadian recovery will push US rates higher despite the Fed's commitment to the zero bound until the economy has cleared the pandemic damage.” 

“The US has a much more comprehensive and frequent statistical regime. If the economic information continues to improve there will be a lot more of its from south of the border and it will impact the USD/CAD more often. Better US data will drive yields in the Treasury market higher as they climb the USD/CAD may follow in their wake.”