Federal Reserve Chair Jerome Powell made a market-moving speech this morning, striking a deliberately hawkish tone regarding the taming of inflation continuing to be the Fed’s priority. While USD is surging against other currencies as markets now expect further interest rate hikes with a greater degree of certainty, let’s explore another currency that may be quite undervalued: the Canadian Dollar. Let’s discuss CAD’s fundamentals, and 3 great CAD pairs to potentially trade next week.
What’s Special About CAD Fundamentals?
Taken at face value, the state of Canada’s economy may not seem especially impressive in terms of fundamental analysis for forex. Annual inflation (7.6%) is high, but not shockingly so relative to other economies, and the unemployment rate hovers just shy of a mediocre 5%. However, upon a closer look, there are many impressive aspects to it, including an extremely hawkish Bank of Canada, a key interest rate identical to that of the US, and positive GDP growth. On top of these conditions, Canada consistently exports oil and gas to the US, an economy approximately ten times bigger, and the estimated value of Canada’s natural resources is over $30 trillion, among the highest in the world.
Best Pairs to Trade
For those who are interested in going long on CAD, here are three of the EdgeFinder’s top-rated suggestions for CAD pairs to sell, along with their respective ratings:
1) GBP/CAD (Earns a -8, or 'Strong Sell')
2) EUR/CAD (Earns a -7, or 'Strong Sell')
3) NZD/CAD (Earns a -3, or 'Sell')
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