The Canadian dollar got strong against its currency counterparts this week as gasoline prices pushed back above $70 a barrel however, the USD/CAD may continue to trend sideways over the following week as the economic docket is expected to reinforce a weakening outlook for the world’s eighth largest economy. At the same time, Credit Suisse overnight index swaps show investors are to price  a 100bp rate hike over the next 12 months as the Bank of Canada expects  economic activity to contract at a more slow  pace than initially anticipated, and the increase in the interest rate outlook may continue to drive the dolar loonie lower over the near term as market participants see a risk of a slower recovery in the U.S. Taking a look at USD/CAD price action, the currency pair failed to cross back above the 50 Day SMA after stalling at a high of 1.1127 on Monday, and retraced the advance from the 2nd week in August to reach a low of 1.0820 by the end of the week. The sharp pull back may follow into the week ahead as market participants raise their outlook for global growth but nevertheless, as the dollar-loonie holds over 1.0792, the August 13 low, we may see the pair base  its existing  range over the following week as investors weigh the outlook for future policy.

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