USD/CAD fell sharply on Friday, as the Canadian dollar posted its strongest one-day gains of the year, surging 1.0 percent. This week’s key events are consumer spending reports. All eyes will be on Canadian GDP, which is released each month. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.
The Canadian dollar managed to post slight gains last week, despite weak Canadian data. Manufacturing Sales fell by 1.4%. Consumer spending also faltered, as retail sales declined by 0.9% and core retail sales dropped by 0.6%.
The U.S. dollar was broadly lower on Friday, in a surprise development over the U.S. shutdown saga. President Trump agreed to reopen government services which had been closed, for a 3-week period.
The U.S-China trade war remains a significant concern for Canadian policymakers, with the U.S. threatening more tariffs in March 1. Chinese officials will be in Washington this week to conduct a second round of trade talks, and any signs of progress would be bullish for the Canadian dollar.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- GDP: Thursday, 13:30. This key indicator can have strong impact on movement of USD/CAD. The economy grew 0.3% in October, its best gain since May. A strong gain in November would be bullish for the Canadian dollar.
- RMPI: Thursday, 13:30. The Raw Materials Price Index continues to post slides, and the November decline of 11.7% was unusually sharp.
- Manufacturing PMI: Friday, 14:30. The manufacturing sector continues to expand, although the December score dropped to 53.6, down from 54.9 a month earlier.
*All times are GMT
USD/CAD Technical Analysis
USD/CAD posted considerable gains early in the week, but retracted sharply on Friday. The line of 1.3265 (mentioned last week) remained relevant throughout the week.
Technical lines from top to bottom:
We begin with resistance at 1.3662. This line marked a high point at the start of January, when the Canadian dollar rallied in the first week of the year.
1.3560 capped $/CAD in May 2017. Next, 1.3445 was the peak in early December.
1.3385 was the high point seen in May. 1.3350 was a stepping stone on the way and on the way down around the same time.
Lower, 1.3265 was the high point in mid-November. 1.3225 was tested in support, as the pair posted strong losses before recovering late in the week.
1.3175 was a swing low in late November. It is followed by 1.3125 which was also a low point, earlier in the month.
Below the 1.3000 level, we find the late-October trough of 1.2970.
1.2880 was a double-bottom in September and in August.
I am neutral on USD/CAD
Low oil prices and a weaker global economy could weigh on the Canadian dollar. At the same time, the currency has benefited from strong risk appetite in January.
Further reading:
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – analysis for dollar/yen
- AUD/USD forecast – projections for the Aussie dollar.
- Forex+ weekly forecast – Outlook for the major events of the week.
Safe trading!
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