Browsing: Canadian Dollar Forecast

The Canadian dollar continues to stumble, as USD/CAD posted gains for a sixth straight week. This week’s highlights are employment change and the unemployment rate. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.

It was another week in the red for the wobbly Canadian dollar. The minor currency has taken it on the chin in recent weeks, as continuing volatility in the equity markets has soured risk appetite and investors have flocked to safe-haven assets. Global trade tensions remain high, and investors remain jittery, even with the announcement that U.S and Chinese trade teams will meet this week. If the sides don’t make progress, the U.S. has said it will impose further tariffs on China on March 1. This could mean more headwinds for the Canadian dollar as we enter 2019.

Another factor weighing on the Canadian currency is the decline in oil prices. WTI Crude has fallen to $45 a barrel, and a weakened global economy could mean that oil prices remain depressed for the foreseeable future.

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

  1. Manufacturing PMI: Wednesday, 14:30. This indicator provides a gauge of the strength of the manufacturing sector. The indicator has shown slight expansion in the past few releases.
  2. Employment Change: Friday, 13:30. This key indicator can have a strong impact on the direction of USD/CAD. In November job creation was unexpectedly strong, with a huge gain of 94.1 thousand. This easily beat the estimate of 10.5 thousand.
  3. Unemployment Rate: Friday, 13:30. Unemployment continues to fall and dropped to 5.6% in November, below the forecast of 5.8%.
  4. Raw Materials Price Index. Friday, 13:30. This inflation indicator continues to struggle, posting three straight declines. Will wee see any improvement in the December release?

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD didn’t miss a beat, posting gains every day last week. The pair continues to break through resistance lines and punched past 1.3560 late in the week (mentioned last week).

Technical lines from top to bottom:

We begin with 1.4102, which has been a strong resistance line since February 2016. This is followed by the round number of 1.39. 1.3757 is next.

1.3645 provided support when the pair traded higher in early 2017. 1.3560 capped $/CAD in May 2017. 1.3445 was the peak in early December.

1.3385 was the high point seen in May and towers above. 1.3350 was a stepping stone on the way and on the way down around the same time.

1.3320 was the high point in late November. Lower, 1.3265 was the high point in mid-November. 1.3225 played a role in capping USD/CAD back in September.

1.3175 was a swing low in late November.

I remain bullish on USD/CAD

Global trade tensions remain high and the Fed just raised rates, so the Canadian dollar is unlikely to end this nasty slide before the New Year.

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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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