USD/CAD reversed directions last week, dropping 110 points. The pair closed the week at 1.3015. This week’s key event is GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
US indicators were mixed last week, as housing data was solid but durable goods orders was weak. GDP posted a lukewarm gain of 0.8%. Fed Chair Yellen kept the door open to a June rate hike and this boosted the dollar. In Canada, the BoC kept rates at 0.50%.
[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily graph with support and resistance lines on it. Click to enlarge:
- Current Account: Monday, 12:30. Current Account is closely linked to the demand for Canadian dollars. The current account deficit narrowed to C$15.4 billion in Q4, compared to the estimate of a deficit of C$16.8 billion. The markets are expecting the deficit to widen in Q1, with an estimate of C$17.4 billion.
- RMPI: Monday, 12:30. This indicator measures inflation in the manufacturing sector. The index rebounded in March, posting a strong gain of 4.5%, above the estimate of 3.9%. This marked the strongest gain since February 2015. Another gain is expected in the April report, with an estimate of 2.2%.
- GDP: Tuesday, 12:30. GDP is one of the most important economic indicators, and an unexpected reading can have a sharp impact on the movement of USD/CAD. Canadian GDP is released every month. The economy declined 0.1% in March, its first decline since November 2015. The estimate for April is a flat 0.0%.
- RBC Manufacturing PMI: Wednesday, 13:30. This PMI has posted two straight readings above the 50-level, which is indicative of expansion in the manufacturing sector. Will we see another positive release in the April report?
- Trade Balance: Friday, 12:30. Canada’s trade deficit widened to C$3.4 billion in March, well above the estimate of C$1.2 billion. The deficit for April is forecast at $C2.6 billion.
- Labor Productivity: Friday, 12:30. This indicator is released on a quarterly basis. The indicator has posted a small gain of 0.1% in the past two quarters, at 0.1%. Will we see an improvement in the Q2 report?
USD/CAD Technical Analysis
USD/CAD opened the week at 1.3124 and touched a high of 1.3188. The pair then reversed directions and dropped to a low of 1.2910, as support held firm at 1.2900 (discussed last week). USD/CAD closed the week at 1.3015.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom
We begin with resistance at 1.3457.
1.3367 has provided resistance since mid-March.
1.3219 was a cap in April.
1.3081 has switched to a resistance role following strong losses by USD/CAD. It is a weak line.
1.2990 has held firm since mid-April
1.2900 is providing support. This line was under strong pressure last week but held firm.
1.2780 is next.
1.2663 is the final support line for now.
I am bullish on USD/CAD
In the US, a June rate hike isn’t likely, but a move in July is certainly an option. Canada’s economy has not kept up with the US, and monetary divergence continues to favor the US dollar.
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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.
- For the kiwi, see the NZDUSD forecast.
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