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Canadian Dollar Forecast, Minors

USD/CAD Outlook December 10-14

The Canadian dollar had an excellent week, riding on strong employment figures in both Canada and the US. Does it still have more potential to capitalize on the Nexen deal? Trade Balance is the highlight of this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canada  gained 59.3K  jobs in November, beating prediction for an 11.3K job addition, pushing unemployment rate down to 7.2% from 7.4 in October. Much of the job gains came from the private sector indicating, domestic economy is growing. Also the nice Non-Farm Payrolls figure from the US helped the loonie. Will this flow of good data continue in the next months?

Updates: Housing Starts fell to 196 thousand new units, falling below the estimate of 202K. The Trade Balance deficit narrowed to 0.2 billion dollars, beating the forecast of -1.2B. BOC Governor Mark Carney spoke at an event in Toronto. NHPI and Capacity Utilization will be released later on Thursday. USD/CAD has edged lower, as the pair was trading at 0.9829.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:USD/CAD Technical Analysis December 10 14 2012

  1. Housing Starts: Monday, 15:15. Canadian housing starts dropped in October , reaching a seasonally adjusted annualized rate of 204,107 units, down from 223,995 in September and 18.9% below April’s peak of 251,802 units. The reading was worse than the 215,000 units predicted by analysts. The decline occurred both in single and multiple starts. A further decline to 202,000 is forecasted.
  2. Trade Balance: Tuesday, 15:30. Canada’s trade balance deficit narrowed in September to $826 million, from 1.5 billion in August. Exports increased to $38.0 billion, as prices increased 1.9%. Exports of energy were the main cause for this rise.-An increase to 1.2 billion deficit is expected now.
  3. OPEC Meetings: Wednesday. The secretary general Abdullah Al-Badri will have to restrain Iraq’s surge in output to maintain the status-quo of 30 million barrels per day. Another important topic will be the sluggish demand for oil amid the ongoing debt crisis in Europe. The outlook for oil consumption in 2013 remains bleak for now.
  4. NHPI: Thursday, 15:50. The new housing price index climbed 0.2% in August, following a 0.1% rise in July. On a yearly base, the index advanced 2.4% after rising 2.3% in July. The largest monthly surge was in Quebec (+0.6%). A rise of 0.1%is forecasted this time.
  5. Manufacturing Sales: Friday, 15:30. Canadian manufacturing sales edged up 0.4% in September following 0.9% increase in August due mainly to a sharp rise in the aircraft sector. However   only 8 out of the 21 industries showed increase, while the car sales took a sharp dive of 3.6%. Nevertheless this modest rise will support GDP growth in the final quarter. A flat reading is expected.

* All times are GMT.

USD/CAD Technical Analysis

$/CAD  began the week with an attempt to break above the 0.9950 line (mentioned last week). When this attempt failed the pair began a slow grind downwards. The bigger moves were seen on Friday, when the pair managed to challenge the 0.9880 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. Its stubborn behavior as resistance in December proved its strength.

0.9910 remains the chart after serving as a bottom border for the pair in November 2012. It already managed to work as weak resistance in December 2012. 0.9880 showed that it is a clear separator in October 2012. It also had a role in the past. This is a key line on the downside.

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 Clearly Broken

As the chart shows, the pair broke below uptrend support after chewing off this line a bit earlier. This is a bearish sign.

I am bearish on USD/CAD.

The recent jobs report from Canada was excellent, with a healthy rise in full time jobs. In addition, the approval of the Nexen deal was not fully priced and not fully digested by the markets, as it came late on Friday. With the addition of possible more QE in the US, USD/CAD has a lot of potential on the downside.

Another technical view: USD/CAD Tentative Breakdown Below Support

 Further reading:

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