After a very volatile week where the USD/CAD bounced off a strong resistance line, the loonie is now tested: Was it just a normal retracement? Or did the trend reverse?
4 major indicators await the Canadian dollar: Housing Starts, Trade Balance, NHPI and a press conference by Mark Carney. Here’s an outlook for this week + a quick technical analysis for USD/CAD.
After last week’s Canadian dollar outlook, here’s an outlook for the upcoming week, with different data this time.
- Housing Starts: Similar to Building Permits last week, this Canadian housing figure has a strong impact on the currency. After disappointing and standing at 118K last month, it’s now expected to rise to 127K. This figure is published on Monday at 12:15 GMT, when there aren’t too many indicators, especially not in America, so this figure is especially strong.
- Trade Balance: It’s published on Wednesday at 12:30, at the same time with American Trade Balance. This double feature release in North America shakes the USD/CAD every month. Focusing on Canadian Trade Balance, the surplus is expected to squeeze from 1.1 billion to 0.8 billion. Since commodity prices have risen lately, this surplus could be higher than expected. The Canadian economy is quite dependant on commodity export. This will also affect the American trade deficit.
- NHPI: New Housing Price Index is another important indicator for the housing sector. It’s expected to fall by 0.3%, after falling by 0.5% last time. While it’s an important figure, the release timing, at the same time with the trade balance makes it less significant. NHPI can have a big impact only if the result is far from expectations.
- Mark Carney’s Speech: After last week’s rate decision, BOC Governor Mark Carney will approach the press again. First, a pre-written statement will be released, and then he’ll hold a press conference. Reporters in Montreal might approach him with tough questions. His answers might move the Canadian dollar. This will happen on Thursday at 17:45 GMT.
As with the Euro (EUR/USD coverage here), USD/CAD will naturally move also by the American dollar’s fiddle. Apart from the double feature Trade Balance on Wednesday, American Retail Sales on Thursday are important to the USD/CAD.
Two other dollar movers are the G8 meetings on Friday and Saturday, and the new and substantial talks about abandoning the dollar as the world’s reserve currency.
USD/CAD Technical Analysis
Last week, the Canadian dollar stopped its march. USD/CAD hit a major support line, around 1.08 and bounced off. The pair shot upwards and closed at 1.1191. This support line served as a stubborn resistance line in August and September 2008. After it was broken, USD/CAD leaped higher. Now it serves as a strong support line.
USD/CAD is blocked in the other direction at 1.1470. This worked as a support line in two occasions:. In November 2008, the pair was falling down, and bounced back at this line. And just one month ago, in May, the Canadian dollar stopped at this line. After it crossed it two weeks later, it plunged down to 1.08.
The graph speaks for itself:
So, the loonie is now in the middle of these two major lines. Was last week just a momentary pause, or a change of trend?
For more on this week’s events, check out the Forex Weekly Outlook.
Liked this post? Vote for it on Forex Factory.
Share
