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USD/CAD Forecast June 24-28 – Canadian dollar streaks to 15-week high

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USD/CAD continues to show volatility, declining 1.4% last week. This week’s key event is the monthly GDP report. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.
Canadian consumer spending and inflation numbers were in the spotlight last week. CPI was unchanged at 0.4%, above the estimate of 0.1%. Core CPI, which excludes the most volatile items which comprise CPI, also came in at 0.4%, a three-month high. Retail sales and core retail sales both posted weak gains of 0.1% in April, after strong gains of over 1.1% in March. Earlier in the week, manufacturing sales disappointed with a decline of 0.6% in April, its sharpest drop since December.
In the U.S., a lack of key indicators meant that investor focus was on the Federal Reserve. As expected, the Fed maintained rate levels, but the message from policymakers is that a rate cut is in the works. The Fed hinted at a rate cut in 2020, but it’s noteworthy that eight FOMC members favor a rate cut in 2019. The markets are prepared for a move later this year, with the CME Group pricing in a rate cut in September at 62%. 

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

  1. Wholesale Sales: Tuesday, 12:30. The indicator tends to show strong swings, making accurate predictions a tricky task. In March, wholesale sales jumped 1.4%, crushing the estimate of 0.4%.
  2. GDP: Friday, 12:30. Canada’s GDP reports are released monthly. In March, the economy rebounded with a gain of 0.5%, above the estimate of 0.3%. GDP is expected to slow to 0.2% in April.
  3. RMPI: Tuesday, 12:30. The Raw Materials Price Index is an important inflation index. In April, the index jumped 5.6%, its strongest monthly gain since December 2016. Will we see another strong gain in May?
  4. BoC Business Outlook Survey: Friday, 14:30. This well-respected survey looks at a wide range of business conditions, including spending and hiring expectations. It should be treated as a market-mover.

* All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

With USD/CAD posting sharp losses, we start at lower levels:

1.3660 was the high point for USD/CAD in December.

1.3547 capped USD/CAD in June 2017. 1.3445 (mentioned last week) has weakened in resistance.

The pair broke through resistance at 1.3385 late in the week. Close by is 1.3350.

1.3265 has some breathing room in support after strong gains by USD/CAD last week.

USD/CAD broke below 1.3225, which had held in support since early March.

1.3175 was a swing low in late November. This support line was breached late in the week.

1.3125 was a low point earlier in November.

1.3048 has provided support since late October. 1.2916 is next.

1.2831 is the final support level for now.

I am neutral on USD/CAD

The Canadian dollar has showed strong movement in the month of June. What’s next for the currency? The situation in the Persian Gulf remains tense, and a wrong move by Iran or the U.S. could lead to an armed confrontation, which would likely sap risk appetite and hurt the Canadian dollar. On the other hand, the clear message from the Fed that a rate cut is on the way makes the U.S. dollar less attractive to investors.

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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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