Browsing: Canadian Dollar Forecast

USD/CAD touched a 1-month high but then retracted and showed little change over the week. This week features Canadian inflation and retail sales reports. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
It was a quiet week out of Canada, with no major events. Foreign securities purchases posted a gain for a second straight month, with a gain of C$4.76 billion. This beat the estimate of C$4.22 billion.
In the U.S., the focus was on consumer inflation and spending reports. CPI improved to 0.4%, above the estimate of 0.3%. This was the strongest monthly gain since March. The core reading ticked higher to 0.2%, up from 0.1%. This matched the estimate. Retail sales reports were mixed. Retail sales rebounded with a gain of 0.3%, up from -0.3% a month earlier. This beat the estimate of 0.1%. The core reading improved to 0.2%, up from -0.1%. However, it missed the forecast of 0.3%.

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

  1. Manufacturing Sales: Tuesday, 13:30. Manufacturing sales rebounded in August, posting a gain of 0.8% after two declines. However, investors are braced for a decline of 0.5% in September.
  2. Inflation Data: Wednesday, 13:30. Consumer inflation remains subdued, posting three declines in four months. In September, CPI declined by 0.4%. The core reading came in at a flat 0.0%. We now await the October data.
  3. ADP Nonfarm Employment Change: Thursday, 13:30. This employment indicator slowed to 28.2 in September, marking a 4-month low. Will we see an improvement in October?
  4. BoC Financial System Review: Thursday, 15:30. The Bank of Canada publishes its overview of the financial system twice a year. Apart from data about the banks’ situation, the publication also includes economic data.
  5. Retail Sales: Friday, 13:30. In August, Canadians squeezed their spending: retail sales slipped by 0.1% on the headline and 0.2% on the core. We will now get an update for September. Consumer spending is closely watched by investors and significant deviation from expectations could certainly move the Canadian currency.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3565.

1.3445 has remained intact since the first week of June. 1.3385 is next.

1.3330 has held since early September.

1.3265 is an immediate resistance line.

1.3150 is providing support.

1.3100 has some breathing room after USD/CAD posted gains last week.

1.3048 (mentioned last week) is protecting the round number of 1.3000, which has psychological significance.

1.2916 was last tested in October 2018.

1.2830 is the final support line for now.

I am neutral on USD/CAD

The Canadian dollar dodged a bullet last week, as it managed to recover from losses in the middle of the week. There are indications that the U.S. and China are close to reaching a limited trade deal, and if there are signs that this is the case, we’re likely to see an improvement in risk appetite, which would be bullish 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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