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 closed a turbulent week on the upside as trade concerns and the Fed pushed the greenback higher. What’s next? Canadian retail sales and inflation on Friday stand out. Here are the highlights and an updated technical analysis for USD/CAD.

US President Trump and Canadian PM Trudeau clashed in the G-7 Summit that was disastrous and ended without a communique. That sent the pair higher. Later in the week, US inflation accelerated and retail sales beat expectations. The Fed not only raised rates but also signaled two additional increases and sent a very optimistic message. The US dollar continued forward and trade concerns gave a boost to the pair later in the week when the US imposed tariffs on China. All in all, there is a lot to worry about for Canada and a lot going in favor of the USD.

Updates:

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

  1. Lynn Patterson talks Monday, 15:45. The Bank of Canada Deputy Governor will speak in Toronto and may discuss monetary policy. And, perhaps, the speech or the questions may focus on trade. Any substantial concern could weigh on the loonie.
  2. Oil Meetings: Thursday and Friday. The OPEC-JMMC are held on Thursday while the regular OPEC meeting is on Friday. Oil prices have risen quite substantially since the last gathering of the oil cartel and some countries want to loosen production limits. The fresh US sanctions on Iran and production issues in Venezuela have also contributed and will be discussed. A decision to keep the caps could boost oil prices and support the C$ while opening up the floodgates could weigh on the price of the black gold and on the loonie.
  3. ADP Non-Farm Payrolls: Thursday, 12:30. The ADP report comes after the official release of job figures and therefore has a lesser impact. In addition, the publication for Canada is a relatively new development. ADP reported a gain of 30.2K jobs in April and weaker data is likely for May.
  4. Inflation and retail sales: Friday, 12:30. The Bank of Canada is optimistic on inflation and the recent wage data has been quite promising. Back in April, headline CPI rose by 0.3% but Core CPI increased by only 0.1%. Other measures of inflation such as the Common  CPI (1.9%), Median CPI (2.1%), and Trimmed CPI (2.1%) are looking good. The report for May provides insights. Canada publishes the retail sales report for April at the same time. While headline inflation advanced by 0.6%, core sales, excluding autos, fell by 0.2%. The double-feature publication is set to move the loonie quite substantially.

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD was on the up and up, breaking above the previous 2018 peak of 1.3125 (mentioned last week).

Technical lines from top to bottom:

We start from higher ground this time. 1.3560 capped the pair back in May 2017 and is a high point. 1.3360 heled the pair down on an attempt to recover in June 2017. 1.3205 is the close level on June 15th this year.

1.3125 is the high point for 2018 until it was broken. 1.3065 was the high point in May and also earlier in the year.

1.30 is a round number that is eyed by many. 1.2920 capped the pair in late April and early May as well. 1.2820 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 remain bullish on USD/CAD

Things are only getting worse for the Canadian dollar. Even if there is some relief in trade tensions with the US, a lot of damage has already been done. Better data is unlikely to boost the loonie too much. A correction could come after the recent rise, but the direction is quite clear.

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