Browsing: Canadian Dollar Forecast

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

Dollar/CAD was on the up and up reaching the highest since June 2017 due to dovish words by Poloz, tweets by Trump, and poor Canadian data. What’s next? The inflation and retail sales reports on Friday are the main events. Here are the highlights and an updated technical analysis for USD/CAD.

BOC Governor Poloz said that the Canadian economy can continue growing on and on without creating too much inflation and that the BOC is obliged to let it run. This hurt the loonie. Later on, Trump insisted that Canada had a trade surplus with the US, aggravating tensions. A Mexican comment about NAFTA without the US also weighed on the Canadian dollar. Data in Canada was not too encouraging either, with a second consecutive drop in new home sales.


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

  1. Wholesale Sales: Tuesday, 12:30. Sales at the wholesale level serve as a warm-up for the retail sales report later on. After a drop of 0.5% in December, the report for January is expected to show a gain of 0.1%.
  2. Carolyn Wilkins talks Thursday, 18:45. The Deputy Governor of the BOC will give a speech in Toronto and may refer to the current concerns about trade and also monetary policy. Wilkins has moved the C$ in the past.
  3. Inflation data: Friday, 12:30. The Bank of Canada wants to let inflation run, but will it indeed move forward? After a significant rise of 0.7% in January, headline CPI is forecast to rise by only 0.4% this time. Core CPI rose by 0.5%. The BOC also publishes its other various measures of core inflation: Trimmed, Median, and Common.
  4. Retail sales: Friday, 12:30. Consumers did not do extensive Christmas shopping: the 0.8% fall in retail sales sent the C$ plunging. A significant recovery worth 1.1% is on the cards now. Core sales are projected to rise by 0.9% after falling by 1.8% last time.

All times are GMT

USD/CAD Technical Analysis

Dollar/CAD had only one direction: up. After some hesitation, it broke above 1.30 (mentioned last week) and left dust behind it.

Technical lines from top to bottom:

1.3460 capped the pair last year and is high above in the sky. 1.3320 was the top of the range back in June last year.

1.3180 was a support line in 2017 and now turns into resistance. 1.31 is a round number and immediate resistance.

1.30 is a round number that is eyed by many. 1.2920 was a triple top in late 2017 and switches positions.

1.2790 was high in mid-November and serves as resistance. 1.2665 was a was a double-bottom in November and works as strong support.

It is followed by 1.26, a round number that worked as resistance in October. 1.2540 capped the pair in early October when it traded in a narrow range.

I am bullish on USD/CAD

While the pair may be entering overbought territory, the dovish sentiment from Poloz and yet another potential slump in inflation could keep the pair depressed, at least until NAFTA concerns are alleviated. 

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