Browsing: Canadian Dollar Forecast

USD/CAD posted gains for a second successive week, and the pair punched above the 1.35 line for the first time in 2019. This week’s key event is Canadian GDP. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.

There were no surprises from the Bank of Canada, which maintained the benchmark rate at 1.75%. The rate statement was dovish, reinforcing the view that the BoC will put a freeze on rates, which could last until 2020. The bank noted that the oil price decline had reduced investments and exports in the energy sector, and investment and exports in other sectors had been dampened by trade tensions and the slowdown in the global economy.

In the U.S, last week’s numbers were positive. Durable goods orders climbed 2.7%, crushing the estimate of 0.7%. Core durable goods orders gained 0.4%, marking a 9-month high. This was followed by a strong initial GDP release of 3.2% in Q1, well above expectations. This was much stronger than Final GDP for Q4, which came in at 2.2%.

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

  1. GDP: Tuesday, 12:30. Canadian GDP is released on a monthly basis. The economy produced a gain of 0.3% in February, after two straight declines. Will we see a stronger gain in March?
  2. Raw Materials Price Index: Tuesday, 12:30. This important inflation indicator has been showing strong gains, and climbed 4.6% in March, well above the estimate of 1.2%. This marked the strongest monthly gain since December 2017.
  3. Manufacturing PMI: Wednesday, 13:30. The PMI has slowed for four successive months, as the manufacturing sector has been damaged by the global trading war, which has reduced demand for Canadian exports. The April reading of 50.5 pointed to stagnation.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start at 1.3757, which has held 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) was breached in resistance for the first time since March.

1.3385 was breached early in the week as the pair posted strong gains. 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 was a low point earlier that month.

1.3048 has provided support since early November.

I remain bullish on USD/CAD

The BoC remains in dovish mode and policymakers have acknowledged that the economic slowdown was deeper than the bank expected. The U.S economy in better shape than its Canadian counterpart, so the Canadian currency is likely to face further headwinds, although higher oil prices could limit the damage to the loonie.

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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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