Browsing: Canadian Dollar Forecast

The Canadian dollar made a false break , and also got stuck in a trading range. This week’s important Canadian releases and the NFP might move the loonie. Here’s an outlook for 4 major Canadian events and a technical analysis for USD/CAD:

This week’s crowded calendar of events and the introduction of the new NFA regulations might set a new direction for the loonie. Contrary to other pairs, the Canadian dollar hasn’t been stuck in a range for a long time. Let’s see the events:

  1. Building Permits: Despite being an important figure for any economy, Canadian Building Permits went wild in the past few months, going sharply up and sharply down. This time, expectations are different: they’re expected to rise by 1.1%. For comparison, they flew up by 14.8% last month and dived by 5.4% on the month before. These wild moves are typical. It’s published on Thursday at 12:30 GMT.
  2. Employment Change: Canada’s two employment figures are published on Friday at 11:00 GMT, an hour and a half before the all-important American Non-Farm Payrolls. These hours are critical for the USD/CAD. Employment Change is expected to fall by 20K, renewing the deep dives of previous months. Last time it made a good surprise and fell by only 7.4K. It could print a positive surprise this time as well.
  3. Unemployment Rate: Published at the same time as the Employment Change, Canadian Unemployment Rate is quite stable. It’s predicted to step up from 8.6% to 8.8%, after surprising and falling last month. As in the previous figure, I also believe that we’ll see a positive surprise. here.
  4. Ivey PMI: An hour and a half after the NFP, this important Canadian figure will shape the closing chords of USD/CAD for the week. The Richard Ivey School of Business releases this important figure that surveys how business feel about the economy. If expectations are met, Purchasing Managers’ Index will stand on 55.3, finally holding two months in a row above the 50 mark, which indicates economic expansion.

Naturally, the big load of events on the southern side of Canadian border will also impact the USD/CAD pair. Apart from the aforementioned NFP, watch out for the

USD/CAD Technical Analysis

The Canadian Dollar traded in a narrow range this week, from the peaks of 1.0930 on Wednesday to the lows of 1.0750 on Tuesday. At first, the Canadian dollar seemed like it’s breaking the critical 1.08 support line, but it turned out to be a false break. Also Friday’s weak monthly GDP score shattered the hopes of a breakout. Here’s the current graph:

canadian dollar august 2009

If this week does bring a breach of this line, then the next support line is at 1.0340, which was  a strong support line during 2007, and a long-standing resistance line in 2008.

On the upside, a weakening of the Canadian dollar will meet resistance at 1.0930, this week’s high, then at 1.1130 and further north at 1.1470, the old resistance line.

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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