Browsing: Canadian Dollar Forecast

USD/CAD Technical Analysis, Canadian dollar forecast ► preview 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 1 dollar coin) is a commodity currency. Canada’s primary export is oil and fluctuations in the “black gold” move CAD 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. NAFTA renegotiations are progressing slowly.

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 without the latest algorithmic tools. Even the Canadian jobs report tends to result in a relatively long move.

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

Dollar/CAD Recent Moves

The Bank of Canada raised rates in two consecutive meetings, pushing the currency higher. Governor Stephen Poloz also signaled that further hikes are on the cards. This sent the USD/CAD all the way to the 1.20 handle. Nevertheless, the pace could be much slower now.

From the lows, the pair began a correction phase. Economic data was mostly positive in 2017: robust growth and mostly upbeat jobs reports. However, inflation is not rising too fast in Canada, similar to other countries. Only house prices are rising, especially in Toronto and in Vancouver. With ongoing NAFTA talks and a more erratic Trump in October, trade could become a significant factor for the C$ in the last quarter of 2017.

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

Latest weekly Canadian dollar forecast

Dollar/CAD slipped from the highs in a much-needed correction. The upcoming week’s highlights are the inflation and retail sales reports. What’s next? Here are the highlights and an updated technical analysis for USD/CAD.

Canadian housing figures were mixed: housing starts beat expectations with 217K while building permits plunged by 5.5%. In the US, the Fed’s worries about inflation hurt the greenback and eventually, the inflation data hurt as well. Oil prices advanced and helped the loonie recover.

Updates:

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

  1. Foreign Securities Purchases: Monday, 12:30. This is a measure of inflows into Canada. Back in July, it beat expectations with 23.95 billion, showing confidence. A lower number is likely now.
  2. BOC Business Outlook Survey: Monday, 14:30. The quarterly report provides an insight on the economy, especially as it is released early in the quarter and comes from the BOC. After a very strong Q2, it will be interesting to see if the report points to a cooldown in the economy.
  3. Manufacturing Sales: Wednesday, 12:30. In the past two months, the volume of sales disappointed with bigger-than-expected falls. After a slide of 2.6% in July, we can expect a bounce now. The figure tends to move the loonie.
  4. Inflation report: Friday, 12:30. The Bank of Canada sees inflation as rising in the near future these expectations supported the rate hikes. But is inflation really rising? Headline CPI rose by 0.1% in August. Core CPI remained flat and disappointed last month. The BOC also releases additional core measures: Common CPI stood at 1.5% y/y, the Median at 1.7% and the Trimmed at 1.4%. If they all move in one direction, the loonie will feel it as well.
  5. Retail sales: Friday, 12:30. If inflation does not provide big surprises, retail sales can take the lead in moving the C$. The volume of sales rose by 0.4% in July. Core sales lagged behind and rose by 0.2%.

* All times are GMT

USD/CAD Technical Analysis

Dollar/CAD dropped to lower ground but managed to escape the 1.2410 level mentioned last week.

Technical lines from top to bottom:

1.2770 capped a recovery attempt in August and is our top line for now. 1.2665 was a swing high of a move higher in early September. It is followed by 1.26, a rdoun number that worked as resistance in October.

1.2540 capped the pair in early October when it traded in a narrow range. 1.2410 held the pair cushioned for some time but was eventually broken. 1.22 is a round number and also worked as support a few years ago.

1.22 is a round number and also worked as support a few years ago. 1.2065 is the (current) swing low of September 2017. It is followed by the obvious level of 1.20.

I am bearish on USD/CAD

It seems that the consolidation may have reached an end. The data could provide the next leg of rises, as well as the rising prices of oil. In the US, hesitation over inflation weighs.

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