USD/CAD reversed directions last week, posting gains of 0.50%. This week’s key is the Bank of Canada rate decision. Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.
Canadian inflation and retail sales numbers were strong last week, but that wasn’t enough to prevent a losing week for the Canadian dollar. CPI remained steady at a respectable 0.7%. Retail sales jumped 0.8%, ending a losing streak of three straight declines. Core retail sales also were solid, with a gain of 0.6%.
In the U.S., retail sales data was also sharp. After a decline in February, retail sales jumped 1.6%, above the estimate of 0.9%. Core retail sales gained 1.2%, beating the forecast of 0.7%. As well, unemployment claims sparkled with a reading of 199 thousand. This was only the second reading below the 200-K level in 2019.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- Wholesale Sales: Tuesday, 12:30. Wholesales sales is a leading indicator of consumer spending, which is key driver of economic growth. The indicator improved to 0.6% in January, a 3-month high.
- Canadian Rate Decision: Wednesday, 14:00, press conference at 15:15. The Bank of Canada has been in dovish mode in 2019, after aggressively raising interest rates in 2018. The bank has held rates at 1.75% for the past four months. The economic slowdown has been deeper than the BoC expected, leading to speculation that a rate cut could be in the cards later this year. The bank is expected to maintain rates at this week’s meeting, but a dovish rate statement could send the Canadian dollar lower.
USD/CAD Technical Analysis
Technical lines from top to bottom:
We start at 1.3757, which has held since May 2017.
1.3660 was the high point for USD/CAD in December.
1.3547 capped USD/CAD in June 2017. Next, 1.3445 was the peak in early December.
1.3385 (mentioned last week) was tested in resistance throughout the week and the pair finally broke through at the end of the week.
1.3350 has remained relevant throughout the month of April.
Lower, 1.3265 was the high point in mid-November. 1.3225 has held in support since early March.
1.3175 was a swing low in late November.
1.3125 was a low point earlier that month.
1.3048 has provided support since early November.
1.2970 is just below the round level of 1.3000. This line was a trough in late October.
1.2915 has held in support since mid-October. It is the final line for now.
I am bullish on USD/CAD
The Canadian dollar hasn’t been largely trading sideways. Oil prices have been moving higher, which has bolstered the loonie, as Canada is a major oil producer. However, this has been largely offset by concerns that the Bank of Canada could cut interest rates at next week’s policy meeting. Canadian economic data has been lukewarm, as the tariff war between the U.S. and China has hurt the Canadian export sector.
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