Since the start of the move, the pair has retraced roughly half of the entire September rally. The DXY dollar index (a basket of the dollar against six major currencies) is holding near 101.70 after a three-week low of 101.45 on Thursday.
The reason is that the market is pricing in the Fed and the Bank of Canada taking different paths at next week's meetings. The Bank of Canada's decision is on October 28, and some participants are expecting a rate hike for the first time in a year. From the Fed, by contrast, a pause is expected, while the market puts the probability of a December hike at roughly 80%.
Canadian data has reinforced the case for a hike: annual inflation accelerated to 3.1% in September - a four-month high. Retail sales for August rose 1.2% after a 0.8% drop in July (the forecast was 1.3%), and excluding autos they were also +1.2% versus the expected 1.0%.
Opinions are divided. At TD Securities, they expect the rate to be left at 2.25% in October, with 25-basis-point hikes in December and January; they called the October move a "reckless risk" and chose not to hold a position ahead of the meeting, calling the outcome too close to call.
Oil adds to the backdrop: prices are rising on Middle East tensions, and for the Canadian dollar this is a key export commodity. The nearest point is October 28, then the US midterm elections on November 3.
Seven days of trend - and how much did you take from it?
Such a smooth trend on a major pair is a gift: you don't have to guess the reversal, just hold. But the result is counted not in pips but in money, and here everything is decided by the volume you can trade: with an account of fifteen hundred dollars, a seven-day move covers at best a terminal subscription. In prop trading, the trading notional is provided by the company - you pass its evaluation stage and trade its account for a share of the profit. There is time until October 28 to understand the mechanics.