Browsing: Canadian Dollar Forecast

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

Dollar/CAD eventually jumped higher on disappointing data from the Canadian economy, after initially weathering the strength of the US Dollar. The economic calendar is relatively light, leaving room for NAFTA headlines to have a greater say. Here are the highlights and an updated technical analysis for USD/CAD.

Canadian manufacturing sales rose by a robust 1.4% and foreign securities purchases stood at 6.15 billion, also above expectations. But the figures that made a bigger difference were inflation and retail sales. Slower inflation and a big drop in core retail sales sent the loonie sharply lower on Friday. In addition, the weak economic data came on top of comments from the top US Trade Representative, Robert Lighthizer. He said that NAFTA negotiations are “nowhere close” to completion, contrasting optimism from Canadian PM Justin Trudeau. In the US, 10-year bond yields rose to 3.13%, the highest since 2011, supporting the greenback. Upward revisions on American retail sales and other small beats on economic indicators served as excuses to buy the greenback.

Updates:

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

  1. Wholesale Sales: Tuesday, 12:30. Sales at the wholesale level disappointed with a fall of 0.8% in February. A bounce with a rise of 0.9% is on the cards.
  2. Corporate Profits: Thursday, 12:30. Corporates saw a drop of 1.9% in profits in the last quarter of 2017, but this came after a leap of 8.5% in Q3 2017. We could see a rise now.

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD dropped towards 1.2730 (mentioned last week) but stalled a bit above that line.

Technical lines from top to bottom:

1.3180 was a support line in 2017 and now turns into resistance. 1.3125 is the high point for 2018 so far.

1.30 is a round number that is eyed by many. 1.2920 capped the pair in late April and early May as well. 1.2810 served as support in early May.

1.2730 was a swing low seen mid-May. It is followed by 1.2690 which was a swing high back in February. Further down, 1.2615 and 1.2535 where the top and bottom of a range seen in early April.

I am neutral on USD/CAD

The disappointing data is accumulating and it is hard to remain optimistic on the loonie. On the other hand, NAFTA is not priced in, so a surprise announcement on a deal could boost the C$.

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