Home USD/CAD Outlook July 29-August 2

USD/CAD  was on a downward trend for most of last week, dropping close to one cent. The pair closed the week at 1.0274.  It’s  another light week on the calendar, with just two releases, including GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canadian retail sales numbers were sharp, while the US posted a mix of releases. This allowed the  loonie to continue its upward trend, as it posted respectable gains against the US dollar.

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USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Forecast July 29-Aug2

  1. RMPI: Tuesday, 12:30. This inflation index looks at the change in prices paid my manufacturers for raw materials.  Higher costs for these materials are usually passed on the consumers. The index  has showed sharp movement in both directions, making accurate forecasts a tricky task.  In June, the index bounced back after  a sharp  decline  and posted a weak gain of 0.2%. However, this fell short of the estimate of 0.5%. The  estimate for the July estimate stands at  a flat 0.0%. Will  the index surprise the markets with a  strong reading?
  2. GDP:  Wednesday, 12:30.  Unlike many other countries, including the US, Canada releases GDP on a monthly basis. The indicator measures the change in the goods and services produced by the economy, and it is considered one of the most important economic indicators. GDP has posted very modest gains of late, gaining just 0.1% in the June release. The markets are expecting a slight improvement, with a forecast of a 0.2% gain. An unexpected reading could affect the movement of USD/CAD.

* All times are GMT

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0354, which was also the high of the week. The pair then dropped to a low of 1.0255, as the support line of 1.0250 (discussed last week)  held firm. USD/CAD closed the week at  1.0274.

Live chart of USD/CAD:

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Technical lines, from top to bottom:

We  begin  with resistance at 1.0853. This line  has remained intact  since September 2009.

1.0705 saw a lot of action in  January 2010, but  has quietly provided strong resistance since that time. 1.0652 has been providing resistance since early September 2010.

1.0523 was a peak back in November 2011. It has strengthened as  the Canadian dollar has improved in July.

1.0446 was the peak that the pair recorded in June 2012 and  was a key line on the upside in mid-July. It has some breathing room with USD/CAD trading at lower levels.

1.0340 was providing weak support to start off the week, but the pair quickly easily broke through as the Canadian dollar improved. It is providing resistance, but is not a strong line.

USD/CAD is receiving support at 1.0250. This line  was a peak before the pair moved below parity a long time ago, and worked as support quite well in March 2013. This line came under strong pressure this week but held firm, and starts off the week as weak support.

1.0180 provided support for the pair during March, and saw a lot of activity in the first half of June. It continues to provide the pair with support.

The round number of 1.01 was a trough back in July 2012 and switched to resistance afterwards. The line proved its strength several times in 2013, most recently in mid-May.

1.0050 provided support for the pair in May 2013 and in other occasions beforehand. It remains a barrier before parity. 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 and also in early 2013.

0.9910 was last tested in January, which marked the start of a strong US dollar rally which saw USD/CAD climb to the mid-1.03 range.

The final support line for now is at the round number of 0.9800. It marked a low point of a rally by the US dollar in April 2012, and has remained in place since October.

I  am neutral  on USD/CAD

The Canadian dollar continues to chip away at its US cousin, and has gained over three cents since early July.  However, the Canadian economy has not looked as good as the US one, and we could be due for a correction from USD/CAD. Canadian GDP will be released this week, and this release could have a major impact on the direction of the pair.

Further reading:

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.