Contrary to most currency pairs that are stuck in a narrow range, the Canadian dollar is on the move. It strengthened significantly against the greenback, and stands at a critical level. This week doesn’t feature many Canadian economic indicators, but does feature the monthly GDP, which is released together with the American GDP. Here’s a look back at last week’s powerful events, an outlook for the upcoming week and a technical analysis for the Canadian dollar at this critical point.
Great week for the Canadian Dollar
Last week’s Canadian figures were very bullish for the loonie. It began with Foreign Securities Purchases were almost double the expectations and Wholesale Sales fell much less than expected.
Canadian interest rate stayed at 0.25% as expected, but the Bank of Canada raised the economic outlook for the future. Contraction is expected to stand at 2.3% in 2009, better than 3% that the BOC initially expected.
Wednesday saw better-than-expected Retail Sales: a rise of 1.2% instead of 0.5%. Also the core figure leaped by 0.7%, more than 0.4% that was expected.
The last back wind for the loonie came once again from the BOC: Through the BOC Monetary Policy Report and the BOC Press Conference that followed, they hinted that the recession is about to end, and that consumer confidence is much higher.
The result: USD/CAD fell from 1.1132 to 1.0863.
Upcoming Events for the Loonie
There are very few economic indicators this week in Canada that arrive only near the end of the week. Tension will mount towards these events. American releases will naturally impact the loonie as well, with Durable Goods Orders and GDP being the most important ones. Here are the important Canadian releases:
- RMPI: The Raw Materials Price Index is an important indicator for the commodities-oriented Canadian economy. Last time, they surprised with a rise of 2.2%. This time, the rise will most probably be more modest. Higher raw material prices mean a stronger Canadian economy. The figure is published on Thursday at 12:30 GMT.
- GDP: Canada is unique in publishing a monthly GDP release while other countries release it every month. This means a monthly disappointment…The Canadian economy has contracted for 10 months in a row. Last month, the contraction was modest, only 0.1%, within expectations. This month, economists expect the continuation of the recession, with a drop of 0.4%. Canadian GDP is published at the same time as Advance American GDP for the first quarter, so USD/CAD will seriously shake on Friday at 12:30 GMT.
USD/CAD Technical Analysis
USD/CAD hit a very strong support line – 1.08. I’ve mentioned this significant line in last week’s Canadian dollar outlook. It now stands on the verge of breaking this line. If it makes the move, there’s lots below. It’s all about this critical spot 1.08.
The next support line is around 1.0340, which served as a strong support line in 2007, and as long-standing resistance line during 2008.
Looking up, 1.1130, last week’s close, serves as a minor resistance line, and 1.1470, the old resistance line. I’ve marked all the lines in the forex chart below:
That’s it. After the recent price action in the Canadian Dollar, I’m expecting an interesting week, with the climax being on Friday afternoon.
- For a broad look at this week’s events, read the Forex Weekly Outlook.
- For a coverage of GBP/USD, read the British Pound Outlook.