Browsing: Canadian Dollar Forecast

Dollar/CAD moved back up, mostly a result of the risk-off atmosphere and also due to a mixed Canadian jobs report. The upcoming week features Canadian inflation and other events. Here are the highlights and an updated technical analysis for USD/CAD.

A local crisis in Turkey became global after the European Central Bank expressed concern about banks’ stability. The risk-off atmosphere already built up by souring US-China relations, pushed the dollar and yen higher across the board. The Canadian dollar, a risk currency, suffered. Canada reported a gain of 54.1K jobs and a drop in the unemployment rate to 5.8%. These upbeat numbers masked an increase in part-time positions and a slowdown in wages. Oil prices did not help the C$. NAFTA talks continue, and this remains positive, but there is no breakthrough between US and Mexico while Canada is waiting on the sidelines.

Updates:

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

  1. Manufacturing Sales: Thursday, 12:30. Sales at the manufacturing level are eyed for future consumer economic activity. May saw an increase of 1.4%, above expectations. June could see a slide.
  2. ADP Non-Farm Payrolls: Thursday, 12:30. ADP, a large provider of private sector payrolls, reports changes in employment after the official government data. Nevertheless, it is eyed by markets. After four months of increases, ADP reported a drop of 10.5K in June. July could see an increase.
  3. inflation: Friday, 12:30. Canada’s headline CPI rose by 0.1% m/m and 2.5% in June, fueled by energy prices. We could see a more moderate increase now. Core CPI advanced by 0.1% m/m as well, but only 1.3% annualized. Canada usually publishes the retail sales report alongside the inflation one. This time is different and allows the CPI data to have its say. Alos note the BOC’s various core inflation measures such as the Common CPI, the Median CPI, and Trimmed CPI. All are flirting with the 2% level.

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD kicked off the week with another challenge of the lows, dipping below 1.2975 mentioned last week. It then turned sharply higher, closing above 1.31.

Technical lines from top to bottom:

1.3385 was the peak on two occasions in late June. 1.3350 follows close by after serving in both directions in July 2017.

1.3295 held the pair down in mid-July. 1.3220 capped it earlier in the month.

1.3155 capped the pair in mid-August and serves as resistance. 1.3070 was a swing low in mid-July.

Below 1.3000 we find the mid-August trough of 1.2960.

1.2820 was a low point for USD/CAD in early June and the last line, for now, is 1.2730 which supported the pair in May.

I am neutral on USD/CAD

The advance of NAFTA talks is good news for the Canadian dollar and nothing is likely to change on that front in the upcoming week. On the other hand, the risk-off atmosphere could also extend.

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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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