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Canadian Dollar Forecast

Canadian Dollar – December 13-17

Many events await forex traders this week with Mark Carney’s speech, Labor Productivity, Leading Index and more. Here’s an outlook for the Canadian events, and an updated technical analysis for the Canadian dollar.

The Bank of Canada maintained its key interest rate last week which will be unchanged into next year. The BOC is stressing its concern over a decline in exports and the risks posed by Europe’s debts. Will this policy shelter Canadian economy during these troubled times?

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

usd cad forecast December 13-17

Let’s start:

  1. Capacity Utilization Rate: Monday, 13:30. The industrial capacity utilization rate advanced to 76% in the second quarter of 2010, above the positively revised 74.4% in the first quarter. This was the fourth consecutive quarterly increase, driven by capacity gains in both manufacturing and nonmanufacturing.   Further increase to 76.8% is predicted.
  2. Mark Carney speaks: Monday 17:10. BOC Governor Mark Carney is due to speak about the economic outlook at the Economic Club of Canada, in Toronto. Growing threats to the global recovery Europe’s debt crisis, Canadian exports and the strong Canadian dollar bring uncertainty to the BOC. Mr. Carney agrees that the global economic recovery will be more gradual than previously thought. Global and Canadian recovery these topics are likely to appear in Mr. Carney’s speech.
  3. Labor Productivity: Tuesday, 13:30. Productivity fell 0.8 % in the April-June period as business output increased 0.5 percent and hours worked grew 1.3 %.  Canadian companies bounced back quickly from the recession, rehiring most of the workers they had fired. But the output has been slower to rebound, preventing future economic growth. An increase of 0.3% is expected now.
  4. Leading Index: Tuesday, 13:30. In October, Canada’s composite  leading indicator index  advances by 0.2% following a drop by the same rate in September.  The rate of increase has slowed dramatically. From July 2009 through August 2010, the average month-to-month gain was 0.9%. The decline is mainly due to the housing industry and retail sales.
  5. Manufacturing Sales: Wednesday, 13:30. Manufacturing sales decreased 0.6 % in September to $45.1 billion mainly due to transportation equipment industry. A rise of 0.6% is expected this week.
  6. Foreign Securities Purchases: Thursday, 13:30. Foreign investment rose to a seasonally adjusted CAD 12.25B in September, after rising a revised CAD 10.37B in August contrary to analysts expectations of a decline to CAD 9.21B. A decrease to 10.97B is expected.

* All times are GMT.

USD/CAD  Technical  Analysis

USD/CAD couldn’t break below parity and eventually rose, capped by 1.0140, a new line that didn’t appear last week. It eventually closed at 1.0095.

Looking down, there is only minor support on the way to parity – USD/CAD is not only a very round number but also worked as strong support.

Below and very close, 0.9975  cushioned the pair’s fall in the past two months and now works as support. It’s immediately followed by the year-to-date low of 0.9930.

Further lines below were last seen in 2008: 0.98 and 0.97. Reaching these levels depends a lot on  oil prices.

Looking up, 1.0140 capped the pair in the past week and also worked as support earlier in the year. Above, 1.0280 was a very strong resistance line recently and is the next resistance level.

Higher, the 1.0380 line is a very strong resistance line after stopping USD/CAD from  rising several  times in recent months, and is still far. The next line is    1.05 which capped the pair twice during the summer and is the next minor line of resistance.

Even higher, the strong 1.0680 worked as resistance in July and in August, for more than one day in each attempt to break higher.  The next levels are still far – 1.0750 was a swing high during May and also the limit  of a long-term range in 2009. The last line is, 1.0850, which was also a swing high in May.

I am neutral on USD/CAD.

While conditions are improving in Canada, there are many risks that worry the BOC. USD/CAD is likely to remain in a narrow range for another week.

Further reading:

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Anat Dror

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer