Watch for Short-Covering Rally in USD CAD

The Canadian Dollar is locked onto the equity markets.  Topping action in the stock market should lead to a short-covering rally in the USD CAD.

The USD CAD fell sharply lower for the week. The Canadian Dollar is locked onto the rally in the equity markets. The current rally is dependent on the stock market continuing its uptrend. 

Higher commodity prices including crude oil and copper also helped support the strong rally in the Canadian Dollar. Traders have to avoid getting too bullish at current levels because the stock market looks overpriced and toppy.