Browsing: Canadian Dollar Forecast

USD/CAD was almost unchanged over the week. There are four releases in the upcoming week, including Employment Change. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

Canada’s GDP bounced back nicely in June, with a gain of 4.5%. This followed a dismal decline of 11.6% beforehand. Raw Materials Price Index slowed to 7.5%, down from 16.4%. Still, this beat the estimate of 7.0%.

In the US, there was plenty of negative news for the markets to dwell on. Durable goods data softened in June. The headline came in at 7.3%, down from 15.8%. The core reading fell from 4.0% to 3.3%. The Fed maintained the benchmark rate at zero and had a dovish market for the markets, as expected.  Policymakers reiterated their commitment to “act as appropriate to support the economy”, but did not announce any new policy measures.
The initial GDP read for Q2 was dismal. The economy contracted by 32.9%, close to the estimate of 34.5%. The week ended with UoM Consumer Sentiment falling to 72.5, down sharply from 78.1 beforehand.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
  1. Manufacturing PMI: Tuesday, 13:30. The manufacturing sector continues to contract, as the manufacturing PMI has been below the 50-level since February. However, the PMI improved nicely in July, rising from 40.6 to 47.8. Will we break into expansion territory in the upcoming release?
  2. Trade Balance: Wednesday, 12:30. Canada’s trade deficit narrowed in May to C$0.7 billion, down from C$3.3 billion beforehand. We now await the June data.
  3. Employment Report: Friday, 12:30. The economy created almost a million jobs in June, with a reading of 952.9 thousand. This was up sharply from 289.6 thousand in May. Will we see another strong gain in the July release?
  4. Ivey PMI: Friday, 14:00. Business conditions jumped to 58.2 in June, up sharply from 39.1 a month earlier. A reading over 50.0 indicates expansion. Will the upswing continue in July?

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3757.

1.3661 (mentioned last week) is next.

1.3550 switched to resistance last week, when USD/CAD posted strong losses.

1.3420 was tested throughout the week. It is an immediate resistance line.

1.3330 is providing support.

1.3265 is next.

1.3078 is the final support level for now.


I am neutral on USD/CAD

The Canadian dollar has taken advantage of broad US dollar weakness, but Canada’s economy is very dependent on a recovery south of the border, as well as the price of oil, which has been soft. The strength of the June employment report could play a key factor in the fortune of USD/CAD this week.

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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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