The Canadian dollar reversed directions last week, as USD/CAD dropped about 80 points, closing at 1.0853. This week’s highlights are Core CPI and Core Retail Sales. Here is an outlook on the major events and an updated technical analysis for USD/CAD.
The Canadian dollar managed to move higher last week, and shrugged off a dismal Manufacturing Sales release late in the week. In the US, it was a week to forget, as key releases, notably employment and retail sales, fell short of their estimates.
[do action=”autoupdate” tag=”USDCADUpdate”/] USD/CAD daily chart with support and resistance lines on it.
Click to enlarge: 
- Foreign Securities Purchases: Monday, 12:30. This indicator is closely linked to currency demand, since foreigners must purchase Canadian dollars in order to buy domestic securities. The indicator disappointed in April, dropping to -$1.23 billion. This was nowhere near the estimate of $7.12 billion. The markets are expecting a strong turnaround in the May release, with the estimate standing at $4.27 billion.
- Wholesale Sales: Wednesday, 12:30. Wholesale Sales is an important gauge of consumer spending. The indicator dropped sharply last month, posting a decline of 0.4%. This was well shy of the estimate of +0.4%. The estimate for the May reading stands at 0.3%.
- Core CPI: Friday, 12:30. Core CPI is the first major event of the week. Core CPI excludes the most volatile items which make up CPI and tends to distort the underlying trend. The index has been on a downward trend, and fell to 0.2% in April, a three-month low. No change from last month’s figure is expected in the upcoming release.
- Core Retail Sales: Friday, 12:30. This indicator excludes automobile sales, which are included in Retail Sales and tend to be very volatile. The indicator posted a paltry gain of 0.1% last month, short of the estimate of 0.5%. The forecast for the May reading is a gain of 0.4%. An unexpected reading can quickly affect the movement of USD/CAD.
- CPI: Friday, 12:30. CPI is considered the primary gauge of consumer inflation. The index has been dropping since February, and slipped to 0.3% in April, matching the forecast. The downward trend is expected to continue, with an estimate of 0.2%.
- Retail Sales: Friday, 12:30. Retail Sales is the primary gauge of consumer spending. The indicator declined by 0.1% last month, missing the estimate of 0.2%. The markets are expecting a strong turnaround, with the estimate standing at 0.4%.
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0935 and touched a high of 1.0941, as resistance at 1.0945 (discussed last week) held firm. The pair then pushed dropped sharply, sliding to a low of 1.0842. USD/CAD closed the week at 1.0853.
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 line 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.
1.0945 held steady as the pair came close to this line early in the week, before retracting below the 1.09 line.
1.0815 remained in place in a support role. However, it lost strength over the course of the week, and could face strong pressure if the loonie continues to improve.
1.0737 was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory.
1.0660 saw a lot of activity in the second half of December and continues to provide strong support.
1.0526 has been a strong support line since late November.
1.0422 is the final support level for now. It was a key support line in mid-November.
I am bullish on USD/CAD
The Canadian dollar gained ground last week, but this was due to a string of weak US releases rather than any good news out of Canada. If Canadian inflation and retail sales don’t impress this week, the loonie could take a hit. The markets will be keeping a close eye on this week’s FOMC statement, which could be a market-mover.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar.
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