Browsing: Canadian Dollar Forecast

The Canadian dollar stood out this week by making against the US dollar while other currencies lost ground. This week’s employment figures, as well as 6 other major Canadian events, will shape the direction of the loonie. Here’s an outlook for the main Canadian events, and an updated technical analysis for USD/CAD.

For the latest outlook, check out the section: USD/CAD Forecast.

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

USD/CAD - October 2009

This week’s disappointing GDP release, which was worse than expected, hurt the loonie only temporarily. Apart from the employment figures, the double feature trade balance releases in the US and Canada will shake USD/CAD. Let’s see what’s on the menu:

  1. Building Permits: This housing figure is very important for the loonie, yet very shaky. Last month plunge of 11.4% was explained by a civic workers’ strike in Toronto. But looking back at previous months shows that the wild changes aren’t new to this index. A return to normal moves is expected this time – a rise of 2.3%. Published on Tuesday at 12:30 GMT.
  2. Ivey PMI: The Richard Ivey School of Business publishes this highly regarded purchasing managers’ index on Tuesday at 14:00 GMT. This PMI figure has shown economic expansion in the past three months, a trend that is expected to continue. Ivey PMI is predicted to rise from 55.7 to 56.9 points this time.
  3. Housing Starts: The complementary figure for Tuesday’s building permits holds less hopes. After rising nicely from 138K to 151K last month, housing starts in Canada are expected to calm down and stand on 147K. Any surprise will sure shake the loonie.
  4. Paul Jenkins speaks: In a previous public appearance, BOC Senior Deputy Governor Paul Jenkins has been optimistic about recovery. He’ll speak on Thursday at 20:05 GMT, and his words could move the markets when volume isn’t so high.
  5. Employment Change: Canada’s own NFP has already shown a growth in jobs twice this year. Last month’s growth of 27.1K jobs surprised the markets and helped the loonie. Job losses are expected to return this time, with an expected fall of 6.7K. A positive number will sure shake the loonie. Published on Friday at 11:00 GMT, together with the unemployment rate.
  6. Unemployment Rate: The complementary figure for the employment change is expected to rise from 8.7% to 8.8%. Looking at the past, economists have been too pessimistic in many cases. This figure is closely looked by the media and by policy makers. Published on Friday at 11:00 GMT.
  7. Trade Balance: Canada has a small deficit in the trade balance for the past 4 months. This time, it’s expected to squeeze from 1.4 to 0.8 billion. The release time, on Friday at 12:30 GMT, is at the same time with the American Trade Balance release. This double-feature timing means that USD/CAD will strongly shake.
  8. BOC Business Outlook Survey: Last but not least, the Bank of Canad releases this important survey of 100 businesses on Friday at 14:30 GMT. This report is considered very reliable, and hints about future rate decisions. The timing, near the end of the forex trading week, when a “Friday effect” is looming over the markets, makes it very important.

USD/CAD Technical Analysis

The Canadian dollar managed to gain against the US dollar this week. It began the week in a strong manner, with USD/CAD going as low as 1.0671 on Wednesday. With the dollar’s recovery later in the week, USD/CAD went up again, and closed at 1.0795.

1.0625, the bottom from August, served as a support line also afterwards. This is the first important support. Below, 1.03 is the next support line. IT served as such during the height of the crisis, about a year ago.

Looking up, 1.1130 is a strong resistance line. It has been tested twice in recent months. Further up, 1.1470 worked well as a support line in the past, and is now a resistance line.

My sentiment on USD/CAD is neutral. Extraordinary employment figures can push it out of the recent range.

Further reading:

Get the 5 most predictable currency pairs

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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