Browsing: Canadian Dollar Forecast

The loonie enjoyed risk appetite for a second week in a row. This week consists of key indicators for the next rate decision. Here’s an outlook for Canadian events and an updated technical analysis for USD/CAD, which is closer to parity once again.

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

canadian dollar forecast

The markets disregard the European trouble (with focus now on Spain again) and seek “risky” currencies. The Canadian dollar also enjoys the rising price of oil, and his its eyes on parity. Prices need to rise in other areas in order to push inflation. Let’s start:

  1. CPI: Published on Tuesday at 11:00 GMT. A rise in the consumer price index is necessary for further rate hikes, after the BOC made its first move. Current inflation conditions are still tame. CPI rose by 0.3% last month after remaining unchanged beforehand, and Core CPI, which is also closely watched by the central bank, also rose by 0.3%. More modest rises are expected this time.
  2. Retail Sales: Published on Wednesday at 12:30 GMT. This major consumer indicator made a surprising jump last month – 2.1% instead of 0.2% that was predicted. Also the core figure was a big surprise, jumping by 1.7%. Yet again, the expectations remain modest, with a rises of less than 1% predicted in both indicators.

USD/CAD Technical Analysis

The Canadian dollar continued the trend from last week, and after falling below 1.04, USD/CAD continued to fall gradually towards the next support line – 1.02, which it closed very close to, at 1.0210.

1.02 continues to be a dominant line – this was the 2009 low and also a line of resistance when the pair reached parity. A break below 1.02 will send the pair towards minor support at 1.01 (a line that was added on last week’s outlook).

Below 1.01 comes the ultimate support line – parity. USD/CAD parity was last seen in April but didn’t hold for too long. Lower, 0.98 is a minor line of support, followed by 0.97. A bigger surge in oil prices is necessary for the pair to approach these areas.

Looking up, the immediate resistance line is at 1.0560, which served as a line of support and resistance in recent weeks. Higher, 1.0750 was the high line of long time range, and was also tested about a month ago. It’s followed by 1.0850, which was a swing high before the pair went lower.

I remain bearish on USD/CAD.

As the fear factor leaves the markets, the Canadian dollar, with a growing economy, receives the strength it deserves. Next stop – parity.

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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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