Browsing: Canadian Dollar Forecast

The Canadian dollar made a strong and independent move against against the greenback last week. This week features many important releases in Canada that could impact USD/CAD. Here’s an outlook for this week’s key events and a technical analysis for the loonie.

The interest rate decision dominates the scene, yet there are lots of other important releases:

  1. Foreign Securities Purchases: This figure actually shows the flow of money into Canada. We’ve seen nice surprises in the previous months. After standing at 9 billion last month, expectations are for a lower number this time – 7.17 billion. This is quite a late release, but it has importance this week due to timing – it’s released on Monday at 12:30 GMT (together with Wholesale Sales) at a time when no American figures are released, so it can sure move the loonie.
  2. Wholesale Sales: Similar to the Foreign Securities Purchases, it’s a late figure but with a good timing, Monday 12:30 GMT. Wholesale Sales are predicted to take a dive of 2.5% after dropping by 0.6% last time. There’s a good chance of a positive surprise here.
  3. Rate Decision: The Bank of Canada isn’t expected to raise the rock-bottom interest rates until the end of 2009. So, don’t expect the Canadian Overnight Rate to move from 0.25%. Traders will carefully read the accompanying BOC Rate Statement that is published at the same time. Will the statement show optimism for recovery, or complain about the current situation? The delicate wording and the commentary about the statement will sure move USD/CAD. It’s published on Tuesday at 13:00 GMT.
  4. Retail Sales: Retail Sales are an important release everywhere. Last month saw a big disappointment, with a fall of 0.8%. Consumers are still not confident. This time, Retail Sales are predicted to turn positive, and rise by 0.5%. The complementary figure, Core Retail Sales, is very important as well. Here, expectations are for a more modest rise – 0.3%. Published on Wednesday at 12:30 GMT.
  5. BOC Monetary Policy Report: On Thursday at 14:30 GMT, we’ll get a look into what the Bank of Canada thinks about the economic conditions, and especially about inflationary pressures. This insight is a basis for future monetary policy. The release of this quarterly report is followed by a press conference by BOC Governor Mark Carney. When meeting the press, Carney could face tough questions and release some interesting statements that could shake the Canadian dollar.

USD/CAD will naturally move on American events as well, with Existing Home Sales and Ben Bernanke’s testament being the highlights of this week. But with so many important Canadian figures, the focus for loonie traders will be on the northern side of North America…

USD/CAD Technical Outlook

The Canadian dollar began an independent move of strengthening last week. USD/CAD broke an uptrend support line and fell face down, from 1.1670 to 1.1120. This wasn’t correlated to other currencies’ moves against the dollar. Also the Japanese made an independent move one week earlier. Check out my post CAD/JPY Going Wild.

The loonie stopped at 1.1115, which now serves as a minor support line. Looking further down, 1.08 is a very strong support line. It served as a resistance line last year for several months, and was tested as a support line 6 weeks ago.

Looking back up, the 1.1470 point is still significant. Despite being broken recently, it served many times as a stopping point for USD/CAD in both directions. Further up, 1.1730 is another resistance line, far away…

These lines in the USD/CAD can be seen in the graph:

USD/CAD Technical Analysis

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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