Browsing: Canadian Dollar Forecast

Here is the most recent USD/CAD Canadian Dollar Outlook.

USD/CAD has fallen deeply in the past two weeks. This trend continued this week despite ongoing recession. Apart from GDP, there are 4 more crucial events any loonie trade should carefully look out for this week: Building Permits, Interest Rate decision, Ivey PMI and the Unemployment Rate. Let’s dive into their meaning (and timing) for the loonie.

Update, Wednesday, June 3rd, 10:00 GMT: Loonie Stays Behind.

The US dollar began the first week of June with another downfall. The Canadian dollar is one of the winners: USD/CAD now trades at 1.0857. Earlier, it dropped under 1.08. The fall goes on.

Two weeks ago, I wrote about an important week for the Canadain dollar. After last week’s quiet week, we are loaded with event. Here are the Canadian indicators. Note that 3 of them are on

  1. GDP: Canada is unique in providing a monthly GDP figure. GDP for the month of March fell by 0.3% as expected. This sums up to an annualized fall of 5.4% in the first quarter of 2009. Though slightly better than the US, this figure is quite bad. Since this exact result was expected, it only slightly bounced the descent of USD/CAD.
  2. Building Permits: Houses are an excellent measure of a country’s economy. Canada’s Building Permits moved like the forex market – wild! Last month, they rose by a whopping 23.5%. This time, they’re expected to drop by 9.2%. Since this number can make a big surprise, it’ll be quite adventurous to be at the market after the release. It’s published on Thursday at 12:30 GMT.
  3. Interest Rate decision: The Bank of Canada isn’t expected to raise the Overnight Rate above the bottom. At 0.25%, it can’t go lower. After the BOC exhausted it’s interest rate tools, the focus will be on the BOC Rate Statement. Commodity prices have risen lately. This rise affects Canada’s commodity oriented economy. On the otehr hand, Canada is very dependant on the US. So, will the BOC communicate optimism or pessimism? The wording statement will have a great influence on the USD/CAD. Note the timing: half an hour after the Building Permits.
  4. Ivey PMI: Released on Thursday at 14:00 GMT. The Purchasing Managers’ Index supplied by the Richard Ivey School of Business is a highly regarded indicator. Last month, it surprised by scoring above 50 – indicating optimism and economic expansion. This time, it’s predicted to rise from 53.7 to 54.3 – edge higher. If this index will have a different mood than the BOC Rate Statement, the loonie will go quite wild.
  5. Unemployment Rate: Canada’s employment market is suffering in this recession. The unemployment rate has risen to 8% from around 6% before the crisis began. It’s predicted to worsen and rise to 8.3%. A worse figure will hurt the Canadian dollar and send USD/CAD upwards. The accompanying figure is the Employment Change, published at the same hour – 11:00 GMT. While it’s not so “famous” as the unemployment rate, it’s no less significant for understanding the job market, and actually the whole economy. After surprising last time and rising by 35.9K, it’s expected to turn negative and fall by about 38K. These figures, released an hour and a half before the American Non-Farm Payrolls, will have a great impact on the loonie.

USD/CAD major tehnical lines

After breaking the big barrier of 1.1470, USD/CAD fell more and more. 1.08 also serves as support line, since it acted as a resistance line in September 2008. Yup, about 9 months ago.

The next line is around 1.04, which served both as a support line and as a resistance line during 2008. And of course, there’s the magical parity number: USD 1: CAD 1.

Tha’ts it for the loonie! For further reading:

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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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