Browsing: Canadian Dollar Forecast

USD/CAD posted slight gains last week. The upcoming week is light on data, but retail sales reports could have a significant impact on the movement of USD/CAD. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.
In Canada, CPI slowed to 0.4%, after two straight gains of 0.4%. Core CPI dropped to 0.0%, its lowest level in 4 months. There was positive news on the manufacturing front, as manufacturing sales jumped 2.1%, above the estimate of 1.5%. This marked the strongest gain since November 2017. As well, ADP nonfarm payrolls jumped in April, as the economy created 61.7 thousand jobs.
Trade tensions between the U.S. and China rocked global equity markets last week. The U.S. and China have exchanged tariffs on each other products, dampening hopes for a trade deal and weighing on risk appetite. Nervous investors have been dumping equities in favor of safe-haven assets, such as the U.S. dollar and the Japanese yen. The U.S. raised tariffs on $200 billion in Chinese goods, from 10% to 25%, and the response was not long in coming. The Chinese response was vigorous, as China retaliated with tariffs on $60 billion of U.S products. Although the U.S.and China are scheduled to continue trade talks, investors are wary after the latest tariff battle.

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

  1. Retail Sales Data: Wednesday, 12:30. As the primary gauge of consumer spending, retail sales is carefully monitored. Retail sales jumped 0.8% in February, after three successive declines. Core Retail Sales posted a strong gain of 0.6% in February, above the estimate of 0.2%. Will we see an improvement in the March numbers?
  2. Wholesale Sales: Thursday, 12:30. Wholesale sales slowed in February to 0.3%, but still beat the forecast of 0.1%.
  3. Corporate Profits: Thursday, 13:30. Canadian corporations showed a sharp drop in profits during Q1, falling 3.9%. The decline comes after gains in profits in three straight quarters. Data for Q2 is due now.

* All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

1.3915 was an important resistance line back in February 2016.

1.3757 has held in resistance since May 2017.

1.3660 was the high point for USD/CAD in December.

1.3547 capped USD/CAD in June 2017. 1.3445 (mentioned last week) remained relevant throughout the week. It starts the upcoming week as a weak support line.

1.3385 is next. Close by is 1.3350.

Lower, 1.3265 was the high point in mid-November. 1.3225 has held in support since early March.

1.3175 was a swing low in late November.

1.3125 is the final support level for now.

I remain bullish on USD/CAD

The escalation in trade tensions between the U.S. and China has dampened trade tensions. This has weighed on risk currencies as investors seek safe-haven alternatives, such as the U.S. dollar. This could mean headwinds for the Canadian dollar.

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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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