Recap
The Canadian dollar has spent most of February and March tightly correlated to the EUR. While Canadian data hasn't been overwhelming for much of the year (excluding last Friday's employment and housing data), it's far from the EUR. My guess is that this is due to 1) dollar index (DXY) buying on the back of the strong dollar trade and 2) low CAD volume. The pair hit 1.0336, its highest mark in 9 months on Wed after the Bank of Canada published slightly more dovish language on removing monetary stimulus from the economy. The retreat from this high was swift back to 1.0315 and then comfortably back below 1.0300 for the rest of the week.
Outlook
There is very little in the way of data releases from Canada this week. There appears to be significant selling interest at 1.0300, so it will be interesting to see if there is a divergence from the EUR at this level if DXY starts taking off again this week. I will watch this correlation and possibly enter short for a quick 10 or 20 pips if it breaks. I am very short this pair on a long term basis, but it may take another few good data releases before any significant reversal to the downside emerges. That said, if advances above 1.0300 are consistently resisted in the London/NY sessions, I may put some more short on for the long-term.
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