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USD/CAD Forecast September 23-27 – Canadian Dollar Shrugs Off Fed Rate Cut

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It was another quiet week for the Canadian dollar, as USD/CAD posted slight gains. With just one Canadian event on the schedule, U.S. releases will have a magnified effect on the direction of the pair. Investors will be keep a close eye on Final U.S. GDP for Q2. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
In Canada, consumer inflation disappointed in July, as CPI fell by 0.1%, compared to a gain of 0.5% in the June release. Core CPI also declined by 0.1%. Oil prices soared early in the week in response to an attack on a Saudi oil refinery, but the Canadian dollar did not show much reaction.
In the U.S., the Federal Reserve cut rates by a 1/4 point, the second rate cut in less than two months. The move did not weigh on the U.S. dollar, as Fed Chair Powell sounded hawkish, saying that the U.S economy was in strong shape and that the rate cut was an insurance policy in case the economic picture deteriorated.

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

  1. Wholesale Sales: Monday, 12:30. Wholesale Sales have been quite erratic, resulting in estimates that are often well off the mark. In June, the indicator gained 0.6%, well above the estimate of -0.2%.  The markets are expecting a drop to zero in July.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3630. 1.3565 is next.

1.3445 has held in resistance since the first week of June. This is followed by 1.3385.

1.3350 is the next resistance line.

1.3265 was active throughout the week. USD/CAD ended the week just below this line.

1.3175 is providing support.

1.3125 (mentioned last week) is next. It has provided support since the end of July.

1.3048 is protecting the round number of 1.3000, which has psychological significance.

1.2916 has held firm since October.

1.2830 is the final support line for now.

I remain bullish on USD/CAD

The surge in oil prices this week is indicative of rising tensions in the Persian Gulf, and any further ominous developments could quickly dampen risk appetite and hurt minor currencies like 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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