USD/CAD returned to trade under parity as the loonie enjoyed the upbeat global mood. Gross Domestic Product is the highlight of this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The price of oil remained stable, despite the ceasefire in the Middle East. Canadian retail sales edged up by 0.1% in September from August, missing forecasts of a 0.5% increase. Its contribution to gross domestic product was negligible. The BOC growth forecast for the fourth quarter is 2.5%, however in light of the recent weak data, analysts are not confident Canadian economy would pick up that strongly.
Updates: Corporate Profits rebounded sharply in Q3, posting a gain of 3.7%. No releases are scheduled until Friday. The loonie has edged higher against the US dollar, as USD/CAD was trading at 0.9910.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge: 
- Corporate Profits: Tuesday, 13:30. Canadian corporate profit dropped sharply in the second quarter, down 4.9% from a 0.1% profit in the first quarter. Fifteen of 22 industries surveyed registered profit declines. But the oil and gas and insurance industries posted the largest declines. However on an annualized basis, profits were still 1.5% higher than they were a year ago.
- Current Account: Thursday, 13:30. Canada’s current account deficit edged up to C$16.02 billion ($16.18 billion) in the second quarter, from a revised C$10.15 billion in the first quarter. Analysts expected a deficit of C$15.30. Canadian current account deficit is predicted to continue in the coming months in light of weak U.S. growth, and global uncertainty. Deficit is expected to reach C$18.00 billion.
- RMPI : Thursday, 13:30. Raw Materials Price Index increased 1.3% in September, rising for the third consecutive month. Mineral fuels increased, while, animals and animal products, vegetable products and wood products declined. Meanwhile, Canadian Industrial Product Price Index increased 0.5% amid higher prices in primary metal products, petroleum and coal products. RMPI is expected to drop 0.4% while IPPI is predicted to remain flat.
- GDP: Friday, 13:30. The Canadian economy contracted unexpectedly in August for the first time since February, dropping 0.1% amid lower output in mining, crude petroleum, manufacturing, utilities and retail trade correlated with weak oversees demand. Finance Minister Jim Flaherty said growth is “on track” this year despite the soft August figures. GDP is forecasted to gain 0.1%.
* All times are GMT.
USD/CAD Technical Analysis
$/CAD began the week by losing the parity line (mentioned last week). It then traded in a narrow range between parity and 0.9950 before sliding and finding support at the uptrend resistance line.
Technical lines, from top to bottom:
Far in the distance, 1.0362 was a peak in June and also beforehand. 1.0250 was a peak back in July, more than once, and is minor now.
1.02 was the trough of 2009 and remains important since then, working in both directions. Another round number, 1.01, was a trough back in July, and switched to resistance afterwards.
1.0066 was key support before parity. It’s strength during July 2012 was clearly seen and it gave a fight before surrendering. It has a stronger role after capping the pair during November 2012.
The very round number of USD/CAD parity is a clear line of course, and the battle was very clear to see at the beginning of August 2012. 0.9950 provided some support for the pair during November and worked as resistance earlier.
0.9880 showed that it is a clear separator in October 2012. It also had a role in the past. 0.9817 was a stubborn peak in September and is now significant resistance. It is a weaker line at the moment.
Lower, 0.9725 worked as strong support back at the fall of 2011 and showed its strength once again in October 2012. 0.9667, which was another strong cushion in June 2011 is the next line.
The round number of 0.96 provided some support back in 2011 and is minor now.
Wide Uptrend Channel Strengthening
As the chart shows, the pair is trading in a wide uptrend channel since mid-September, and it found support at uptrend support just now.
I am bearish on USD/CAD.
While the Canadian economy is still looking for a direction, the housing sector’s resilience is questioned and the price of oil is easing after the ceasefire in the Middle East, the Canadian dollar could find strength in the US dollar. Even if no there are no news about the cliff (fiscal cliff explained here) an upgrade of the GDP figure for the US could certainly boost the loonie – Canada depends on US demand.
- 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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