Seven straight days of USD/CAD gains speaks to a strong rejection of what looked like it could be a breakdown in August and September. The chart is a big of a nightmare for technical analysis as it had a break, then a lower low then a snap-back rally into the middle of the old range. It also had a failed break to the upside in July.
Those are maddening moves for momentum chasers and speak to uncertainty around the strength of the global, US and Canadian economies.
From where I stand, Canada is feeling the weight of higher interest rates but that's somewhat obscured by higher spending among the non-mortgage class. Jobs aren't nearly as plentiful but layoffs are minimal. I think there is clear evidence of a slowdown and housing is hurting right now but it's something that could be mitigated by swift rate cuts.
I expect the BOC to deliver 50 bps on October 23 despite that being just 25% priced in, though my confidence level is low. We get the September jobs report on Friday and that will be a big input followed by CPI on Oct 15. Canadian inflation is already at 2.0% so there are abundant reasons to cut.
I think the market is sending a strong signal with the pair rallying despite higher oil prices recently and China stimulus. That said, seven days in a row is a stretch for this usually-sleepy pair so I certainly wouldn't be chasing the bid here.
