Home USD/CAD Forecast July 14-18

The Canadian  dollar  lost close to a cent last week, as USD/CAD  broke above the 1.07 line, closing at 1.0732.  There are a host of key  events in the upcoming week, highlighted by  Manufacturing Sales and Core CPI. Here is an outlook on the major events and an updated technical analysis for USD/CAD.

Canadian employment numbers were a big disappointment last week, as Employment Change tumbled and the unemployment rate moved up to 7.1%. In the US, the FOMC minutes did not shed any light on possible interest rate hikes, and Unemployment Claims looked very sharp.

[do action=”autoupdate” tag=”USDCADUpdate”/] USD/CAD daily chart with support and resistance lines on it.

Click to enlarge:

USDCAD Forecast July14-18

 

  1. Manufacturing Sales:  Wednesday, 12:30. This is the first key event of the week. The indicator struggled in May,  coming in at -0.1%. This was nowhere near the estimate of  +0.9%.  The markets  are expecting a strong turnaround this time around, with  the estimate standing at 1.3%. If  the indicator  can  meet or beat the forecast,  the  loonie could get a lift.
  2. BOC Monetary Policy Report:  Wednesday, 14:00. The BOC will be in the spotlight on Wednesday, starting with the Bank’s Monetary Policy Report, which is released  every quarter. Analysts will be combing through the report, looking for hints as to future monetary policy. A press conference will follow.
  3. Overnight Rate:  Wednesday, 14:00. The BOC has pegged the benchmark interest rate at 1.00% since September 2010, and no change is anticipated in this month’s rate. The BOC will make the announcement  in a rate statement.
  4. Foreign Securities Purchases:  Thursday, 12:30. This indicator is directly linked to currency demand, as foreigners must purchase Canadian dollars in order to buy domestic securities. The indicator bounced back last month with a strong gain of $10.13 billion, easily surpassing the estimate of $4.27 billion. The upswing is  expected  to continue, with an estimate of $14.23 billion, which would be the highest level seen in 2014.
  5. Core CPI:  Friday, 12:30. Core CPI is one of the most important indicators and excludes volatile items which are included in CPI. The index posted a gain of 0.5% last month, beating the estimate of 0.2%. The markets are bracing for a decline in June, with the estimate standing at -0.1%.
  6. Wholesale Sales:  Friday, 12:30. Wholesale Sales is an important gauge of consumer spending, which is a critical component of  economic growth. The indicator sparkled last month, jumping 1.2%,  its highest level since last  November. The markets are expecting  a respectable gain of 0.7% in  the upcoming release.
  7. CPI:  Friday, 12:30. This is the primary gauge of consumer inflation. The index posted a gain of 0.5% in May, compared to an estimate of 0.2%. The June estimate is 0.1%.

* All times are GMT.

 

USD/CAD Technical Analysis

USD/CAD  opened the week at 1.0653 and touched a low of 1.0631. The pair  posted strong gains on Friday, barreling past the 1.07 line and  climbing as high as the resistance line  of 1.0737 (discussed last week).  USD/CAD closed  the week at 1.0732.

Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]

 

Technical lines, from top to bottom:

We  start  with resistance at 1.1369. This level 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.

1.1124  remains a strong  resistance line. It has held firm since late March.

The  psychological barrier of 1.10  has provided  resistance since May, and has some breathing room with the Canadian dollar trading at higher levels. This is followed by resistance at 1.0945.

1.0815  continues to provide resistance, but could face pressure if the pair continues to move higher this week. The line has remained intact since mid-June.

The pair touched resistance at 1.0737 late in the  week.  This line was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory. Look for this line to see activity early in the week.

1.0660  started the week as a weak resistance line, but has switched to a support role as the pair jumped late in  the week.

1.0526 has been a strong support line since late November. 1.0422 was a  key support line in mid-November.

1.0271 is the next support line. This line marked the start of a rally by the pair last October, which saw the US dollar climb above the 1.12 line.

1.0182 is the final support level for now. This line has  held steady  since  September.

 

I am  bullish on USD/CAD

US employment numbers continue to impress, increasing pressure on the Fed to raise rates, which is bullish for the US dollar, Canadian data continues to struggle, and if this week’s key numbers do not meet expectations, we could see the loonie continue its downward trend.

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.