Home USD/CAD Forecast Aug. 25-29

USD/CAD  came close  to the 1.10 line, but    then retracted and showed little change over the week.  This week’s highlight is GDP.  Here is an outlook on the major events and an updated technical analysis for USD/CAD.

Canadian  inflation remains in the doldrums, as  CPI numbers  declined in July.  On a brighter note, retail sales were excellent.  In the US, the economy continues to point in the right direction. There was good news on the employment, manufacturing and housing fronts last week, pointing to balanced growth in the economy. There was a lot of hype  leading up to  Janet Yellen’s speech at Jackson Hole on Friday, but the Fed chair focused on the US employment picture and didn’t provide any  clues about the timing of an interest rate.

Updates:

USD/CAD daily chart with support and resistance lines on it.  Click to enlarge:

USDCAD Forecast AUG25-29

  1. Corporate Profits:  Tuesday, 12:30. The week starts off with this minor release, which tends to show some volatility. The indicator is released every quarter, and jumped 7.4% in Q1, its strongest gain since 2011. The markets will be hoping for another strong outing in Q2.
  2. Current Account:  Thursday, 12:30.  Current Account is directly related to currency demand, since foreigners must purchase Canadian dollars in order to purchase Canadian goods and services. The deficit narrowed to $12.4 billion in Q1, matching the estimate. The markets are expecting more good news in Q2, with the estimate standing at -$11.4 billion. Will the indicator follow suit with a strong reading?
  3. GDP:  Friday, 12:30. GDP is the key event of the week and is one of the most important economic indicators on the calendar. Canadian GDP is released every month, unlike most industrialized countries which release GDP on a quarterly basis.  The indicator  rose to 0.4% last month, edging above the estimate of 0.3%. Little change is expected in the upcoming release, with the estimate of 0.3%.
  4. Raw Materials Price Index:  Friday, 12:30. This indicator measure the change in inflation in the manufacturing sector. The index jumped 1.1%, last month, its best showing since March. This easily beat the estimate of o.6%. The forecast for July stands at 0.7%.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD  opened the week at  1.0893 and  dipped to  a low of 1.0875. The  Canadian  dollar  then reversed direction and climbed to a high of 1.0986, breaking past resistance at 1.0944.  The pair closed the week at 1.0935.

Live chart of USD/CAD:

Technical lines,  from top to bottom:

We  start with resistance at 1.1494. This line has remained intact since November 2006, when the US dollar broke through and continued to rally to a high  above the 1.18 line.

1.1369 was breached in October 2008 as the US dollar posted  sharp gains, climbing as high as the 1.21 level. This line has remained steady since July 2009.

1.1278 has provided resistance since March. This line marked the start of a rally by the Canadian dollar, which dropped below the 1.09 level. This is followed by resistance at 1.1123.

1.1054 marked an important resistance line in April and has held firm since then.

1.0944 was easily breached as the Canadian dollar lost ground and came close to the 1.10 level. It recovered and starts off the weak as a resistance line.

1.0815 has some breathing room in support as the pair trades above the 1.09 line.

1.0737  marked a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory.

1.0621 marked a low point for the pair  in early July. The US dollar has improved sharply since then,  as the pair trades close to 1.10.

1.0526 has been a strong support line since late November.

1.0422 was a  key support line in mid-November. This is the final line for now.

I am  bullish on USD/CAD

The US economy continues to hum smoothly and the Federal Reserve is expected to raise rates sometime next year. US GDP for Q2 is  expected to be close to 3.9%, and a strong reading could give a broad boost to the US dollar.

Further reading:

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.