Browsing: Canadian Dollar Forecast

Dollar/CAD dropped on the calm in NAFTA negotiations and the relative weakness of the US dollar. Can the Canadian Dollar continue forward? Retail sales and inflation stand out on Friday. Here are the highlights and an updated technical analysis for USD/CAD.

Mexico said it is willing to go it alone with the US on a bilateral deal, putting pressure on Canada. NAFTA negotiations continued in slow-motion in Washington. Differences on dairy and arbitration prevail. The US Dollar weakened on no new escalation with China and on weak inflation. Consumer data was already more upbeat.


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

  1. Foreign Securities Purchases: Monday, 12:30. The gauge of flows in and out of Canada showed 11.55 billion coming into the nation in June, above expectations. The positive figures will likely continue.
  2. Manufacturing Sales: Tuesday, 12:30. Sales at the manufacturing level expanded by 1.1% in June. Despite being a relatively volatile measure, the trend is important and it moves the loonie.
  3. ADP Non-Farm Payrolls: Thursday, 12:30. ADP is a large provider of payrolls to the private sector. Their estimate of the job market comes out after the official numbers but still carries some weight. An increase of 11.6K was recorded in July. The government data for August showed a loss of positions but ADP may produce different data.
  4. CPI: Friday, 12:30. Inflation has been moving slightly to the upside, with headline CPI jumping by 0.5% and core CPI by 0.2% back in July. Other measures such as the Common, Median, and Trimmed CPI have been circling around 2%. The Bank of Canada intends to raise rates in October, depending on the NAFTA negotiations of course. A stable level of inflation is needed for Poloz and co. to move ahead with a hike.
  5. Retail Sales: Friday, 12:30. Retail sales saw a slump in June, with -0.2% on the headline and -0.1% on the core figure. The disappointment came after a strong read for May. The see-saw may continue with an increase in July. The publication competes with the CPI figures.

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD kicked off the week consolidating under 1.3170 (mentioned last week). It then turned sharply lower, dipping temporarily below 1.3000 before climbing back up.

Technical lines from top to bottom:

1.3295 held the pair down in mid-July. 1.3220 capped it earlier in the month.

1.3170 served as resistance in mid-August. 1.3100 is a round number that also capped the pair several times in August.

1.3045 seprated ranges in mid-September and is a pivotal line. Below 1.3000 we find the mid-August trough of 1.2960. 1.2890 is the initial low seen in late August.

1.2820 was a stepping stone on the way up in late May. 1.2730 provided support earlier in May. Lower, 1.2630 held the pair down back in April.

I am neutral on USD/CAD

Everything depends on NAFTA. It is hard to predict the mood of US President Donald Trump. A deal will send the loonie higher and USD/CAD way down. A total breakup of the talks will send the C$ plunging and USD/CAD shooting higher. It’s quite binary.

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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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