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.”
- 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.
- 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?
- 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.
- 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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