Browsing: Canadian Dollar Forecast

The Canadian dollar enjoyed a strong week, as USD/CAD dropped close to one percent. The pair ended the week below the symbolic 1.30 level, the first time that has occurred since September 2018.  There are four Canadian events this week, including GDP and Employment Change.  

There were no Canadian events last week.

In the US, PMIs for October indicated stronger growth in the manufacturing and services sectors. Services PMI improved to 57.7, as the index accelerated for a seventh straight month. Manufacturing PMI climbed to 56.7, up significantly from 53.3 beforehand. Both PMIs were well into expansionary territory, which indicates that the economic recovery continues to gain traction. Unemployment claims climbed for a second straight week, with a reading of 778 thousand. This was much higher than the estimate of 732 thousand. Durable goods orders reports were mixed. The headline figure slowed to 1.3%, down from 1.9%. However, the core release climbed from 0.8% to 1.3%.

The week wrapped up with the FOMC minutes of the November policy meeting. The minutes showed that although officials did not believe any changes were needed to the current bond-purchase scheme of $120 billion/month, they were of the opinion that “circumstances could shift to warrant such adjustments.”

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

  1. Building Permits: Monday, 13:30. The indicator soared by 17.0% in September, its highest gain in four months. We now await the October data.
  2. GDP: Tuesday, 13:30. Canada releases GDP on a monthly basis. The economy slowed to 1.5% in September, down from 3.0% beforehand. Will we see a rebound in October?
  3. Labor Productivity: Wednesday, 13:30. Labor productivity is related to labor-related inflation. In Q2, the indicator jumped an impressive 9.8%. We now await the Q3 release.
  4. Employment Report: Tuesday, 13:30. Canada created 83.6 thousand jobs in October, much weaker than the September release of 378.2 thousand. Unemployment slipped to 8.9%, its lowest level since March. Will the downswing continue in the November release?

USD/CAD Technical Analysis

Technical lines from top to bottom:

1.3330 (mentioned last week) has held in resistance since the first week in November.

1.3260 is next.

1.3137 has switched to a resistance role following strong losses by USD/CAD last week.

1.3014 is an immediate resistance line.

1.2931 has held in support since October 2018.

1.2832 is an important monthly support line.

1.2730 is next.

1.2665 was a double-bottom in November 2018 and is the final support level for now.

I remain  bearish on USD/CAD

The US dollar continues to show retreat against the other G-10 currencies. As well, oil prices have risen lately, which is 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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