Rate Decision, BOC Monetary Policy Report and Retail Sales are the highlight of this week. Here is an outlook on the major events ahead and an updated technical analysis for USD/CAD, that reached lower ground.
Canadian businesses continue to be positive about the outlook for the next 12 months despite strong competition and moderate demand. The BOC said 49 percent of companies expected to increase employment in the next 12 months according to the third quarter survey. Will this outlook prove correct?
USD/CAD daily chart with support and resistance lines marked. Click to enlarge:
- Foreign Securities Purchases: Monday, 13:30. Foreigners bought C$9.51 billion Canadian securities in October. Purchases are headed for a second straight annual record, with the year-to-date total of C$97.8 billion greater than the C$88.6 billion recorded in the same period of 2009. Rising demand for Canadian bonds will help balance the government’s budget by 2015-16. A rise in foreign purchases to C$11.54 billion is expected.
- Rate Decision: Tuesday, 14:00. The Bank of Canada maintained its target for the overnight rate at 1% due to the moderate pace of recovery and weaker export. The rate is likely to be maintained at1%.
- Manufacturing Sales: Wednesday, 13:30. Manufacturing sales increased 1.7% in October following a 0.5% decline in September thanks to gains in petroleum products, metals and motor vehicle parts. Economists expected manufacturing sales to rise 0.8%. Another increase of 1.1% is expected now.
- BOC Monetary Policy Report: Wednesday, 15:30. In its last Monetary Policy Report the Bank of Canada claims it doesn’t rule out interest rate increases in the future, although they will have to be carefully considered due to the gradual growth rate of the Canadian economy with slow consumption and weaker housing activity.
- Leading Index: Thursday, 13:30. Leading Index indicating the economic direction rose 0.3% in November the same as in October with increases in the housing index and Manufacturing demand. A further climb to 0.4% is predicted.
- Wholesale Sales: Thursday, 13:30. Wholesale sales remained unchanged at $44.9 billion in October, after advancing 0.7 per cent in September. Wholesalers reported lower sales in October except for Ontario. Nationally, inventories declined 0.7 per cent in October to $52.5 billion, as 16 of the 25 wholesale trade industries recorded a drop. A rise of 0.6% is forecasted now.
- Retail Sales: Friday, 13:30. Canadian retail sales increased 0.8% in October following 0.4% in the prior month. This was the fifth straight month of gains with stronger demand for gasoline. Economists predicted a 0.5% increase with a general rise in purchases. Retail Sales are predicted to climb by 0.5% and Core Retail Sales by 0.6%.
* All times are GMT.
USD/CAD Technical Analysis
The Canadian dollar had an exciting, yet choppy week. USD/CAD reached new lows, but then retreated, rising as high as 0.9977 (mentioned last week) before closing just above the 0.9930 support line.
Looking down, 0.9930 was the low point in 2010, and now provides minor support. Below, the fresh low of 0.9848 is another minor line of support.
Much stronger support is found at two historic lows at 0.98 and 0.97, that worked as strong support back in 2008.
Looking up, 0.9977 returns to having a stronger role, after working well in the past week. The obvious line of parity continues to be a strong line of resistance.
Above parity, 1.0140 worked as resistance in December and also as support beforehand and is the next important line. Above, 1.0280 also worked in both directions, being resistance recently.
The next line is 1.05 which capped the pair twice during the summer and is the next minor line of resistance. Even higher, the strong 1.0680 worked as resistance in July and in August, for more than one day in each attempt to break higher.
Even higher, 1.0750 was a swing high during May and also the limit of a long-term range in 2009. The last line is, 1.0850, which was also a swing high back then.
I remain bearish on USD/CAD.
The improving US economy, with higher oil prices, and of course the Canadian job strength, all point to fresh lows for USD/CAD.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro/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 New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar.