USD/CAD Forecast Mar. 16-20

USD/CAD  continued to push higher last week, as the pair jumped about 170 points. The pair closed at 1.2772, its highest level since March 2009. There are seven events this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

In the US, unemployment claims were sharp, but inflation and consumer confidence numbers missed expectations. Canadian employment numbers beat expectations, but the Canadian dollar couldn’t take advantage.

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

1. Foreign Securities Purchases: Monday, 12:30.  This indicator is closely linked to currency demand, as foreigners must purchase domestic securities with Canadian dollars. The indicator looked awful in December, with a reading of C$-13.55 billion, well of the estimate of C$5.35 billion. The markets are expecting a strong turnaround in the January reading, with an estimate of C$3.74 billion.
2. Manufacturing Sales: Tuesday, 12:30. This is the first major event of the week. The indicator broke a streak of two declines and posted a strong gain of 1.7% in December. This easily beat the estimate of 0.8%. The markets are braced for a weak reading in January, with a forecast of -1.1%.
3. Wholesale Sales: Wednesday, 12:30.  This is an important indicator of consumer spending, a key component in economic growth. The December reading sparkled with a gain of 2.5%, crushing the estimate of 0.4%. Another strong reading is expected in the January report, with the estimate standing at 2.1%.
4. Core CPI: Friday, 12:30.  Core CPI rebounded in January with a gain of 0.2%, which was within expectations. The markets are expecting a stronger gain in February, with a forecast of 0.5%.
5. Core Retail Sales: Friday, 12:30.  Core Retail Sales is the primary gauge of consuming spending and can have a significant impact on the direction of USD/CAD. The indicator disappointed in December with the decline of 2.3%, well below the forecast of a 0.7% decline. The markets are expecting a turnaround in January, with an estimate of 0.1%.
6. CPI: Friday, 12:30.  CPI has struggled lately, posting three straight declines. The January report came in at -0.2%, beating the estimate of -0.4%. The markets are anticipating much better news in February, with an estimate of 0.7%.
7. Retail Sales: Friday, 12:30.  Retail Sales looked awful in December,  posting a reading of -2.0%. This was well off the forecast of -0.3%. Another decline is expected, with an estimate of -0.3%.

* All times are GMT

USD/CAD Technical Analysis

USD/CAD opened the week at 1.2604 and dropped to a low of 1.2573. The pair touched a high of 1.2823 late in the week,  testing resistance at 1.2798 (discussed last week). USD/CAD closed the week at 1.2772.

Live chart of USD/CAD:

Technical lines, from top to bottom

We  start with resistance at 1.3164, which has held  firm since September 2004.

Next is 1.3063, slightly above the symbolic line at the round number of 1.30.

1.2924 was last tested in March 2009.

1.2798 was tested as USD/CAD pushed above 1.28 before retracting. It is currently a weak resistance line.

1.2624 has switched to a support role as the pair posted strong gains.

1.2541 has strengthened in support. 1.2387  is next.

1.2230 is the  final support line for now.

I remain  bullish on USD/CAD

The US dollar is on a tear against its major rivals, and the Canadian dollar continues to get pummeled. We could see this trend continue unless key Canadian data this week beats expectations.