Browsing: Canadian Dollar Forecast

USD/CAD posted slight losses last week. The upcoming week features Canadian GDP. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
In Canada, Manufacturing Production declined for a fourth straight month, falling by 0.7%. Analysts had expected a gain of 0.8%. There was better news on the inflation front. CPI gained 0.3% in January, marking a 3-month high. Retail sales reports were mixed. The headline release plunged to 0.0% in December, down from 0.9% a month earlier. However, core retail sales improved to 0.5%, marking a 6-month high. This beat the forecast of 0.4%.
In the U.S., the Producers Price Index improved to 0.5%, up from 0.1% a month earlier. The Federal Reserve released the minutes of its most recent meeting. The minutes reaffirmed that Fed policymakers are cautiously confident that they can maintain current interest rate levels in 2020. At the same time, the minutes highlighted the significant risk posed by the coronavirus outbreak, stating that “the threat of the coronavirus, in addition to its human toll, had emerged as a new risk to the global growth outlook, which participants agreed warranted close watching.” Policymakers also noted that the outbreak has dampened investor sentiment. This warning from the Fed underscores the threat that coronavirus poses to the global economy.

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

  1. Wholesale Sales: Monday, 13:30. The indicator has pointed to a decline in sales in three of the past four releases. The November release fell by 1.2%, much weaker than the estimate of -0.2%. The estimate for December stands at 0.5%.
  2. Corporate Profits: Tuesday, 13:30. Corporate profits is a useful gauge of the strength of the corporate sector. The indicator posted a slight gain of 0.4% in Q3, down sharply from 5.2% in Q2. We now await the fourth-quarter release.
  3. Current Account: Thursday, 13:30. Canada posts current account deficits on a regular basis. In December, the deficit jumped to C$9.9 billion, above the estimate of C$9.5 billion. This was up sharply from the November deficit of C$6.4 billion. Will we see an improvement in the December release?
  4. GDP: Friday, 13:30. Canada’s GDP reports continue to hover around the zero level, pointing to weak economic growth. In November, the economy grew by 0.1%, above the forecast of 0.0%. The December estimate is unchanged at 0.1%.
  5. Raw Materials Price Index: Friday, 13:30. This key inflation indicator accelerated for a second straight month, climbing to 2.8% in December, well above the estimate of 0.7%. We now await the January release.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3660, which held since December 2018. 1.3550 is next.

1.3420 has remained intact since June 2019.

1.3330 has served in a resistance role since early December.

1.3265 remained relevent throughout the week. It is currently a weak resistance line.

1.3150 is providing support.

1.3100 (mentioned last week) is the next support level.

1.3048 is protecting the symbolic 1.3000 level.

1.2950 is the final support level for now.

I remain bullish on USD/CAD

The coronavirus has dampened risk appetite and sent oil prices lower, so the Canadian currency will likely remain under pressure.

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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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