The Canadian dollar lost close to a cent last week, as USD/CAD broke above the 1.07 line, closing at 1.0732. There are a host of key events in the upcoming week, highlighted by Manufacturing Sales and Core CPI. Here is an outlook on the major events and an updated technical analysis for USD/CAD.
Canadian employment numbers were a big disappointment last week, as Employment Change tumbled and the unemployment rate moved up to 7.1%. In the US, the FOMC minutes did not shed any light on possible interest rate hikes, and Unemployment Claims looked very sharp.
[do action=”autoupdate” tag=”USDCADUpdate”/] USD/CAD daily chart with support and resistance lines on it.Click to enlarge:
- Manufacturing Sales: Wednesday, 12:30. This is the first key event of the week. The indicator struggled in May, coming in at -0.1%. This was nowhere near the estimate of +0.9%. The markets are expecting a strong turnaround this time around, with the estimate standing at 1.3%. If the indicator can meet or beat the forecast, the loonie could get a lift.
- BOC Monetary Policy Report: Wednesday, 14:00. The BOC will be in the spotlight on Wednesday, starting with the Bank’s Monetary Policy Report, which is released every quarter. Analysts will be combing through the report, looking for hints as to future monetary policy. A press conference will follow.
- Overnight Rate: Wednesday, 14:00. The BOC has pegged the benchmark interest rate at 1.00% since September 2010, and no change is anticipated in this month’s rate. The BOC will make the announcement in a rate statement.
- Foreign Securities Purchases: Thursday, 12:30. This indicator is directly linked to currency demand, as foreigners must purchase Canadian dollars in order to buy domestic securities. The indicator bounced back last month with a strong gain of $10.13 billion, easily surpassing the estimate of $4.27 billion. The upswing is expected to continue, with an estimate of $14.23 billion, which would be the highest level seen in 2014.
- Core CPI: Friday, 12:30. Core CPI is one of the most important indicators and excludes volatile items which are included in CPI. The index posted a gain of 0.5% last month, beating the estimate of 0.2%. The markets are bracing for a decline in June, with the estimate standing at -0.1%.
- Wholesale Sales: Friday, 12:30. Wholesale Sales is an important gauge of consumer spending, which is a critical component of economic growth. The indicator sparkled last month, jumping 1.2%, its highest level since last November. The markets are expecting a respectable gain of 0.7% in the upcoming release.
- CPI: Friday, 12:30. This is the primary gauge of consumer inflation. The index posted a gain of 0.5% in May, compared to an estimate of 0.2%. The June estimate is 0.1%.
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0653 and touched a low of 1.0631. The pair posted strong gains on Friday, barreling past the 1.07 line and climbing as high as the resistance line of 1.0737 (discussed last week). USD/CAD closed the week at 1.0732.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom:
We start with resistance at 1.1369. This level was breached in October 2008 as the US dollar posted sharp gains, climbing as high as the 1.21 level. This line has remained steady since July 2009.
1.1124 remains a strong resistance line. It has held firm since late March.
The psychological barrier of 1.10 has provided resistance since May, and has some breathing room with the Canadian dollar trading at higher levels. This is followed by resistance at 1.0945.
1.0815 continues to provide resistance, but could face pressure if the pair continues to move higher this week. The line has remained intact since mid-June.
The pair touched resistance at 1.0737 late in the week. This line was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory. Look for this line to see activity early in the week.
1.0660 started the week as a weak resistance line, but has switched to a support role as the pair jumped late in the week.
1.0526 has been a strong support line since late November. 1.0422 was a key support line in mid-November.
1.0271 is the next support line. This line marked the start of a rally by the pair last October, which saw the US dollar climb above the 1.12 line.
1.0182 is the final support level for now. This line has held steady since September.
I am bullish on USD/CAD
US employment numbers continue to impress, increasing pressure on the Fed to raise rates, which is bullish for the US dollar, Canadian data continues to struggle, and if this week’s key numbers do not meet expectations, we could see the loonie continue its downward trend.
Further reading:
- 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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