CAD : Forecast

(Wed, 16 Dec 2020). USD/CAD broke lower Tuesday, falling to levels not seen since April 2018. Recent losses have seen the pair extend its sharp decline since late November and its broader weakening since March. Widespread USD weakness and modest Canadian Dollar strength have combined to create a longer-term downtrend for the pair that now threatens to extend into the New Year.

Before doing so, however, USD/CAD will have to negotiate the looming FOMC decision. Given the pair teeters on the brink of oversold territory and market expectations for the Federal Reserve are rather lofty, USD/CAD could undergo consolidation in the shorter-term. That being said, little has changed in the fundamental landscape up to this point and until it does, the longer-term trend will likely remain lower.

Early areas of resistance in the event of a pullback may reside just south of the 1.2800 level and subsequently along the declining trendline drawn off the September and November lows. Since fresh lows are suggestive of persistent weakness, a shorter-term pullback might allow for renewed bearish positioning.

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