USD/CAD Forecast Aug. 3-7 – Flat despite strong Canada GDP

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USD/CAD was almost unchanged over the week. There are four releases in the upcoming week, including Employment Change. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

Canada’s GDP bounced back nicely in June, with a gain of 4.5%. This followed a dismal decline of 11.6% beforehand. Raw Materials Price Index slowed to 7.5%, down from 16.4%. Still, this beat the estimate of 7.0%.

In the US, there was plenty of negative news for the markets to dwell on. Durable goods data softened in June. The headline came in at 7.3%, down from 15.8%. The core reading fell from 4.0% to 3.3%. The Fed maintained the benchmark rate at zero and had a dovish market for the markets, as expected.  Policymakers reiterated their commitment to “act as appropriate to support the economy”, but did not announce any new policy measures.
The initial GDP read for Q2 was dismal. The economy contracted by 32.9%, close to the estimate of 34.5%. The week ended with UoM Consumer Sentiment falling to 72.5, down sharply from 78.1 beforehand.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
  1. Manufacturing PMI: Tuesday, 13:30. The manufacturing sector continues to contract, as the manufacturing PMI has been below the 50-level since February. However, the PMI improved nicely in July, rising from 40.6 to 47.8. Will we break into expansion territory in the upcoming release?
  2. Trade Balance: Wednesday, 12:30. Canada’s trade deficit narrowed in May to C$0.7 billion, down from C$3.3 billion beforehand. We now await the June data.
  3. Employment Report: Friday, 12:30. The economy created almost a million jobs in June, with a reading of 952.9 thousand. This was up sharply from 289.6 thousand in May. Will we see another strong gain in the July release?
  4. Ivey PMI: Friday, 14:00. Business conditions jumped to 58.2 in June, up sharply from 39.1 a month earlier. A reading over 50.0 indicates expansion. Will the upswing continue in July?

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3757.

1.3661 (mentioned last week) is next.

1.3550 switched to resistance last week, when USD/CAD posted strong losses.

1.3420 was tested throughout the week. It is an immediate resistance line.

1.3330 is providing support.

1.3265 is next.

1.3078 is the final support level for now.

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I am neutral on USD/CAD

The Canadian dollar has taken advantage of broad US dollar weakness, but Canada’s economy is very dependent on a recovery south of the border, as well as the price of oil, which has been soft. The strength of the June employment report could play a key factor in the fortune of USD/CAD this week.

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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