Browsing: Canadian Dollar Forecast

Dollar/CAD moved upwards last week, the fourth straight week that the pair has moved higher. Will the Canadian dollar continue to fall? The Canadian calendar is busy this week, with retail sales, CPI and GDP. Here are the highlights and an updated technical analysis for USD/CAD.

The C$ continues to lose ground, as greater risk apprehension has soured investors on riskier assets. This is a result of the ongoing U.S-China trade war. Although the sides are talking to each other, investors appear pessimistic that the sides can reach some agreement which would avoid further U.S tariffs on Chinese goods, which are set to take effect on March 1. The arrest of the CFO of Huawei by Canadian authorities and her possible extradition to the U.S. have triggered an angry Chinese response and threaten to derail the talks.

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

  • Foreign Securities Purchases: Monday, 13:30. An increase in the purchases of Canadian bonds and other assets by foreigners is bullish for the Canadian dollar. In October, purchases increased sharply to C$7.70 billion, crushing the estimate of C$0.30 billion.
  • Manufacturing Sales: Tuesday, 13:30. Manufacturing Sales rebounded in October with a gain of 0.2%, after a decline in September. The indicator is a key gauge of activity in the manufacturing sector.
  • CPI: Wednesday, 13:30.  CPI is the primary gauge of consumer inflation and should be treated as a market mover. After two straight declines, CPI posted a respectable gain of 0.3% in October.
  • Wholesale Sales: Thursday, 13:30. Sales at the wholesale level provide some guidance for the retail level. Sales have sagged, with a decline of 0.1% in September, followed by a decline of 0.5% in October. Will the negative streak end this week?
  • Core Retail Sales: Friday, 13:30. Core retail sales exclude the most volatile items which make up retail sales, thus making it a more reliable gauge of consumer spending. The indicator rebounded in October with a small gain of 0.1%, following a decline a month earlier.
  • GDP: Friday, 13:30. The Canadian economy posted a rare decline in September, dropping 0.1% m/m. The soft reading weighed on the Canadian dollar and was a factor in the BoC holding off from raising rates last week.
  • Retail Sales: Friday, 13:30. Since a sparkling gain of 2.0% in May, retail sales have struggled, as Canadian consumers continue to hold tight to the purse strings. There was some improvement in October, with a small gain of 0.2%, after a decline in September.
  • BoC Outlook Survey: Friday, 13:30. The quarterly survey provides a snapshot of the mood and level of optimism in the business sector. The survey looks at whether businesses are planning an increase in hiring, spending and investment, which provides a gauge of economic activity.

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD headed higher at the start of the week, hitting 1.3416, as it punched past 1.3580, mentioned last week. The pair retracted in mid-week, but the Canadian dollar again weakened, ending the week around the 1.34 level.

Technical lines from top to bottom:

We begin with resistance at 1.3645. This line served in a support role when the pair traded higher in early 2017. 1.3560 capped $/CAD in May 2017. 1.3445 was the peak in early December.

1.3385 was the high point seen in May and towers above. 1.3350 was a stepping stone on the way and on the way down around the same time.

1.3320 was the high point in late November. Lower, 1.3265 was the high point in mid-November. 1.3225 played a role in capping USD/CAD back in September.

1.3175 was a swing low in late November and it is followed by 1.3125 which was also a low point, earlier in the month.

1.2970 is our final support level. It was a trough in late-October.

I remain bullish on USD/CAD

The U.S-China trade war remains in full force, with the threat of further U.S tariffs in March continuing to dampen investors’ appetite for risky assets such as the Canadian dollar. Another soft GDP release this week could send the currency lower.

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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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