The uptrend continues, but being at a high level, any further upward movement might be difficult. The Bank of Canada has regained its status as the regulator with the most hawkish monetary policy, thanks to which the CAD has become one of the strongest currencies in the last two months. The unstoppable growth of oil has also supported the CAD's value, pushing it to the highest positions against other key currencies. However, in June this growth stopped. The rates were under pressure due to disappointing reports on the Canadian economy. In particular, investors are concerned about the growth of unemployment and the reduction in the number of jobs. At the same time, the Bank of Canada reacted to this rather calmly at its most recent meeting and left monetary policy unchanged. Investors feared a negative reaction to the strong Canadian dollar, but this also did not happen. As a result, the rates were almost unchanged this week, although in the face of a weak yen, more volatility is expected than was observed this week.
Despite a number of problems in the Canadian economy and the lag in vaccination compared to the UK and the US, the Canadian dollar has a good potential for growth. There is every reason to expect a new testing of the resistance line and multi-year highs, from which the CAD retreated slightly in early June. The main factor that can stimulate the growth of this pair is oil. The demand for crude oil is growing, negotiations on lifting sanctions against Iran are slow, and analysts predict a further increase in demand, as a result of which in the next two months there will be a peak in demand, and the price of the Brent crude will likely increase to $80.
Next week volatility will increase slightly, although the publication of inflation data in Canada on Wednesday will be in the focus, as well as the Bank of Japan's meeting on Friday, but nothing new is expected for the yen from the regulator, which has been following an ultra-soft monetary policy over the years. Most technical analysis tools indicate the effectiveness of the deals to BUY, and matching the trend is also our choice.
