The Canadian dollar was seen reversing the gains few weeks ago.

What started off a strong rally in the Canadian dollar, marked by two rate hikes this year saw a reversal as economic data showed a flat pace of growth.

This led the Canadian dollar weaker as the U.S. dollar quickly managed to emerge strong. The recent rally in oil prices have also failed to keep the momentum going for the Canadian dollar.

While the initial signs showed that the USDCAD could fall towards the 1.1956 level, price action reversed near 1.2050 region.

The bullish momentum in the Canadian dollar is seen to be clearly slipping.

Economic data released over the past few weeks showed that inflation was easing back after initially posting strong gains.

Likewise, the Canadian GDP was also hit after Canada’s export businesses felt the pinch of a stronger Canadian dollar in the first half of the year.

Rate Hike was supposed to be in December

Adding to the above, the Bank of Canada took a cautious turn after hiking interest rates earlier this year.

Initially, the BoC was expected to hike interest rates in December.

However, the uncertainty due to the NAFTA trade talks alongside a weakening in the economy largely due to the stronger exchange rate of the loonie has now put aside the prospects of a BoC rate hike into next year.

As a result, we can expect to see some continued strength in the USDCAD.

The bullish flag pattern on the weekly chart suggests a bullish rally in the making if it is validated to the upside.