Browsing: Canadian Dollar Forecast

USD/CAD showed little change last week. There are four Canadian economic releases in the upcoming week, including the Bank of Canada rate decision. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.  
The quarterly BoC Business Outlook Survey indicated that business sentiment continues to improve. Firms reported less uncertainty related to the COVID‑19 pandemic and strengthening demand from weak levels. Still, the recovery remains uneven. Manufacturing Sales took a downturn in February, posting a decline of 1.6%. The ADP Employment report surged, with 634.8 thousand new jobs in March.
In the US, CPI rose in March, but the reaction of the US dollar was muted. Headline CPI climbed from 0.4% to 0.6% and Core CPI improved to 0.3%, up from 0.1%. Retail sales soared in March – headline retail sales came in at 9.8% and the core reading rose 8.4%, well above the forecast.
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USD/CAD daily graph with resistance and support lines on it. Click to enlarge:
  1. Housing Starts: Monday, 12:15. Housing Starts fell to 246 thousand in February, down sharply from 282 thousand. The consensus for March stands at 254 thousand.
  2. Budget Release: Tentative. The Trudeau government releases its first budget in two years. The government is expected to pledge tens of billions of dollars in spending to boost the economic recovery, as the government eyes a possible election later in the year.
  3. Inflation Report: Wednesday, 12:30. The recovery is gaining traction, but CPI remains well below the BoC target of 2 percent. We await the headline and core inflation releases for March.
  4. BoC Rate Decision: Wednesday, 14:00. With the economic outlook improving more quickly than anticipated, the BoC could announce a tapering of QE at the upcoming meeting. If so, the BoC would be the first G-7 central bank to tighten policy since the Covid-19 pandemic.

Technical lines from top to bottom:

We start with resistance at 1.2744.

1.2640 was tested at the end of March.

1.2555 (mentioned last week) is next.

1.2345 is the first support level.

1.2181 is the final line for now.

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I remain bearish on USD/CAD

The Canadian economy is finding its footing, and employment numbers continue to impress. If the BoC sends a hawkish message to the market at this week’s meeting, then the Canadian dollar could gain ground.

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USD/CAD Technical Analysis, Canadian dollar forecast ► preview of the key events that move the Canadian dollar (C$) during the upcoming week. Here are some general data. Scroll down for the latest USD/CAD outlook

USD/CAD Characteristics

The Canadian dollar, aka “the loonie” (the loon appears on the 1 dollar coin) is a commodity currency. Oil is Canada’s primary exports and fluctuations in the “black gold” move CAD as well. The C$ also moves with also with stocks, as it is considered a “risk currency”. However, CAD  also depends heavily on demand from its No. 1 trading partner and southern neighbor, the USA. Trump’s trade wars hurt CAD. NAFTA renegotiations are not going anywhere fast.

Dollar/CAD tends to react relatively slowly to important economic data from Canada. Retail traders thus have a better level playing field that can jump into a trade even without the most sophisticated algorithmic tools. Even the Canadian jobs report tends to result in a relatively long move.

USD/C$ technical trading is OK: not choppy and tough, but neither fully respecting lines of support and resistance. Higher market volatility and trading volume make it more predictable.

Dollar/CAD Recent Moves

The Bank of Canada raised rates in two consecutive meetings, pushing the currency higher. However, this short cycle came to screeching halt alongside a slowdown in the economy and worries about inflation.

From the post-hike lows at the 1.20 handle, the pair began a correction phase and topped 1.29. However, the rise in oil prices due to some shortages and some profit taking stabilized the loonie. Another factor to watch is the housing situation in Toronto, Vancouver, and Montreal, which is worrying.

Canadian rate hikes, US demand and the price of oil will continue guiding USD/CAD.

Latest weekly Canadian dollar forecast

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