The old saying goes that if the United States catches a cold, Canada catches the flu.
The market is certainly sending warning signals about the US economy with yields falling, but the USD/CAD pair has yet to make a decisive move. But that moment may not be far away as the pair threatens to hit three highs from the past two years.
USD/CAD Weekly Chart
Previous highs were:
- October 2022: 1.3977
- March 2023: 1.3861
- November 2023: 1.3899
Currently, the pair is trading at 1.3884, up 76 pips on the day. Often, the US and Canadian jobs reports are released at the same time, but that won’t happen on Friday, as the Canadian report won’t be released for another week.
In terms of interest rates, the Fed is pricing in 83 basis points through the end of the year while the Bank of Canada is pricing in 63 basis points. This seems out of context to me, because if the Fed were to cut this rate sharply, the Bank of Canada would be ready to do so.
As for the rise in this pair, I would expect it to reach 1.42 and then 1.44 if these high levels are broken.