The Canadian dollar enjoyed another winning week, as USD/CAD broke below the 1.31 mark for the first time since January. There are five releases in the upcoming week, including the Employment Report. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
In Canada, Corporate Profits declined by 8.0% in Q2, after a plunge of -38.4% in the first quarter. Canada’s GDP impressed with a gain of 6.5% in Q2, after a 4.5% in the previous quarter.
Over in the US, Conference Board Consumer Confidence slipped to 84.8, down from 91.7 beforehand. Durable Goods Orders were mixed – the headline reading accelerated 11.2%, up from 7.3% in the previous release. However, the core release slowed to 2.4%, down from 3.3% beforehand. US second-estimate GDP was upwardly revised to 31.7%, compared to 32.9% in the initial release.
Federal Reserve Chair Jerome Powell made a dramatic address at the Jackson Hole meeting. Powell said that the Fed would allow inflation to overshoot its inflation target of 2.0%. This significant shift in policy means that interest rates will likely stay very low for the foreseeable future. This resulted in broad losses for the US dollar last week.
- Raw Materials Price Index: Monday, 12:30. The inflation indicator posted a gain for a second straight month in June, with a gain of 7.5%. Will we see another solid reading in July?
- Manufacturing PMI: Tuesday, 13:30. The index continues to accelerate and climbed into expansion territory in July, with a forecast of 52.9. Will the upswing continue in the August release?
- Trade Balance: Thursday, 12:30. Canada continues to rack up monthly trade deficits. In June, the trade deficit widened to C$3.2 billion, up from C$0.7 billion beforehand. Will the deficit drop in July?
- Employment Report: Friday, 12:30. The economy had another strong month of job creation in July, with a reading of 418.5 thousand. Since May, the economy has created 1.5 million jobs. We now await the August data. The unemployment rate continues to fall, although it is still mired in double-digits. In July, unemployment fell to 10.9%, down from 12.3% beforehand. Will we see a further improvement in August?
- Ivey PMI: Friday, 14:30. The index accelerated sharply for a third straight month in July, rising from 58.2 to 68.5. A reading above 50 points to expansion. Will the upturn continue in the August release?
- All times are GMT
USD/CAD Technical Analysis
Technical lines from top to bottom:
1.3420 (mentioned last week) has held in resistance since the first week in August.
1.3330 is next.
1.3230 was tested in resistance early in the week.
1.3118 is a weak resistance line.
1.3078 is an immediate support level.
1.2996 is providing support just below the symbolic 1.30 level.
1.2841 is the final support level for now.
I remain bearish on USD/CAD
The Canadian dollar continued its extended string of winning weeks, as USD/CAD has fallen closer to the psychologically important 1.30 level. With Canadian fundamentals continuing to head in the right direction and the US dollar under a broad assault from the major currencies, the Canadian dollar could make further gains next week.
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