Browsing: Canadian Dollar Forecast

USD/CAD Technical Analysis, Canadian dollar forecast ► review of the major events that move the Canadian dollar (loonie) during the upcoming week. Here is some general information. Scroll down for the latest USD/CAD outlook

USD/CAD Characteristics

The Canadian dollar, aka “the loonie” (for the loon on the flipside of the coin) is a commodity currency. Canada’s chief export is oil and fluctuations in the “black gold” move the C$ as well. This also makes it a risk currency, moving not only with crude oil but also with stocks. However, the C$ also depends heavily on US demand, as the southern neighbor is the biggest trading partner. Trump’s trade wars hurt CAD.

Dollar/CAD tends to react relatively slowly to significant Canadian data. This allows a better level playing field for retail traders to jump into the trade. Even the Canadian jobs report tends to result in a relatively long move.

$/C$ technical trading is OK: not tough and choppy but neither fully respecting lines of support and resistance.

Dollar/CAD Recent Moves

Since the big fall in oil prices in late 2014, Dollar/CAD is trading at higher levels. The Bank of Canada cut interest rates twice. The new government led by Justin Trudeau enacted fiscal stimulus, a rarity in the Western world. This takes some of the burdens off the shoulders of Stephen Poloz, the BOC governor.

The ascendancy of Trump to power boosted USD/CAD. The greenback enjoyed hopes for fiscal stimulus and the Canadian dollar suffered from worries about trade. Yet in 2017, the “Donald Disillusion” has a negative impact on the USD. So, USD/CAD is trading more steadily.

Also, watch out for the worries about elevated housing prices in Vancouver and also in Toronto with the HCG issue causing a stir. However, the negative mood may have peaked.

USD/CAD is not moving too far from the 1.30 level, down from the 1.47 peak but way above the near-parity levels.

Latest weekly Canadian dollar forecast

USD/CAD gained 50 points last week, as the pair closed at 1.3264. This week’s key event is GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canadian consumer spending was sharp, as core retail sales jumped 1.5%, beating expectations. In the US, some policymakers reiterated the hawkish bend of the recent rate decision, although other members expressed concern about low inflation levels.

Updates:

USD/CAD daily graph with support and resistance lines on it. Click to enlarge:

  1. BoC Governor Stephen Poloz Speaks: Wednesday, 13:30. Poloz will speak at an event in Portugal. A speech which is more hawkish than expected is bullish for the Canadian dollar.
  2. BoC Deputy Governor Lynn Patterson Speaks: Wednesday, 18:15. Patterson will speak at an event in Portugal. The markets will be looking for clues regarding future monetary policy.
  3. GDP: Friday, 12:30. Canada releases GDP on a monthly basis. In April, GDP jumped to 0.5%, above the forecast of 0.3%. Will the upswing continue in the May report?
  4. RMPI: Friday, 12:30. This inflation indicator rebounded in April with a gain of 1.6% but this was well short of the forecast of 3.8%.
  5. BoC Business Outlook Survey: Friday, 14:30. This report is released every 6 months, and helps analysts gauge the strength of the business sector. The survey asks business about their plans regarding hiring, spending and investment.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.3214 and quickly dropped to a low of 1.3191. The pair then reversed directions and climbed to a high of 1.3347, as resistance held at 1.3351 (discussed last week). The pair closed the week at 1.3264.

Technical lines, from top to bottom

We start with resistance at 1.3648.

1.3551 is next.

1.3457 was a high point in September 2015.

1.3351 held in resistance as the pair posted strong gains before retracting.

1.3212 is an immediate support line.

1.3083 has held in support since February.

1.2980 is next.

1.2823 is the final support level for now.

I am neutral on USD/CAD

A Fed rate hike in December is priced in at 50/50, as consumer spending and inflation remain soft. The Canadian dollar is linked to oil prices, which have been dropped sharply in June. If this trend continues, the loonie could lose ground.

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Further reading:

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