USD/CAD Forecast Dec. 7-11 – Rally continues for Canadian dollar

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The Canadian dollar enjoyed its strongest week since May, as USD/CAD dropped 1.5 percent. This week’s highlight is the Bank of Canada rate decision.  

Canadian GDP, which is released monthly, slowed to 0.8% in September, as the economic recovery may have run out of steam. Job numbers for November sparkled. The economy created 62.1 thousand jobs, defying the consensus of 22.0 thousand. The unemployment rate fell to 8.5%, down from 9.0% beforehand.

The US manufacturing sector continued to grow, as the ISM Manufacturing PMI came in at 57.9, although this was weaker than the previous release of 59.3 points. The ISM Services PMI fell to 55.9, down from 56.6 points. Still, this was a sixth straight month of expansion.

In testimony on Capitol Hill, Federal Reserve Chair Powell reiterated his message for further fiscal stimulus support from the federal government. The week ended with mixed employment numbers. Nonfarm payrolls dropped to 245 thousand, down sharply from 638 thousand. This missed the estimate of 480 thousand. Wage growth surprised with a gain of 0.3%, above the estimate of 0.1%.

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

  1. Ivey PMI: Monday, 15:00. The PMI was almost unchanged in October, at 54.5 points. The index has now been in expansionary territory for five straight months. We now await the November data.
  2. BoC Rate Decision: Wednesday, 15:00. The Bank of Canada holds its monthly policy meeting, with policymakers expected to maintain rates at 0.25%. Canada has posted some solid data recently, and a positive tone from the rate statement could bolster the Canadian dollar.
  3. Capacity Utilization Rate: Friday, 13:30. This indicator has slowed over the past four quarters and fell to 70.3% in the second quarter. This was the lowest figure since 2010. Will we see an improvement in Q3?

USD/CAD Technical Analysis

Technical lines from top to bottom

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With USD/ CAD dropping sharply last week, we start at lower levels:

1.3137 has held in resistance since mid-November.

1.3014 (mentioned last week) is next.

1.2931 has held in support since October 2018.

1.2832 is an important monthly support line.

1.2730 is next.

1.2665 was a double-bottom in November 2018.

1.2545 has held since April 2018.

1.2450 is the final support line for now.

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I remain bearish on USD/CAD

The US dollar remains on the defensive, and a weak NFP report on Friday could weigh on investor sentiment towards the currency.

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About Author

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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