Dollar/CAD had another week of setting new highs but it then dropped sharply on the Canadian jobs report. What’s next? While the Canadian calendar is quite sparse, oil prices will likely rock the loonie. Here are the highlights and an updated technical analysis for USD/CAD.
The C$ had a turbulent week. The BOC was dovish by saying that Canada could experience non-inflationary growth. The chances for a rate hike in January are now lower. On the other hand, Canada enjoyed an enormous gain of 94.1K jobs in November, most of them full-time ones. Oil prices went up and down with every twist in the news related to OPEC. The eventual decision by OPEC and non-OPEC countries to curb output helped prices stabilize. The decision by the regional government of Alberta to introduce its own limits also helped push the Western Canadian Select prices higher in comparison to America’s WTI. In the US, the optimistic tone from the Trump-Xi summit helped the loonie, as a risk currency. Misunderstandings about the decisions and the arrest of the CFO of Huawei hurt the atmosphere.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- Timothy Lane talks: Monday, 6:30, and at 12:45. The Deputy Governor of the Bank of Canada will speak in Istanbul, Turkey. He will have the opportunity to comment on the excellent jobs report published on Friday, which seems much better than the dovish tone of the BOC decision.
- Housing Starts: Monday, 13:15. The housing sector has seen some wobbles in recent months, after years of expansion. The first housing figure of the week is projected to drop from 206K to 198K in the fresh report for November.
- Building Permits: Monday, 13:30. Building consents rose by 0.4% in September after three consecutive months of declines. A return to drops is on the cards for October: -0.2% is forecast.
- Capacity Utilization Rate: Wednesday, 13:30. This measure of the industry provides the BOC insights on the level of slack in the economy. Utilization has been fluctuating in the mid-80s in recent quarters. After 85.5% in Q2, a small increase to 85.8% is expected for Q3.
- NHPI: Thursday, 13:30. The New Home Price Index has not moved much in recent months. It was flat in the past two months and is projected to remain unchanged also in the upcoming report for October.
*All times are GMT
USD/CAD Technical Analysis
Dollar/CAD kicked off the week with an upwards move, hitting 1.3445, just short of 1.3460 mentioned last week. It then made a sharp U-turn and dropped back down.
Technical lines from top to bottom:
1.3645 served as support when the pair traded on higher ground in early 2017. 1.3560 capped $/CAD back in May 2017.
1.3580 capped the pair back in June 2017 and towers above. 1.3445 was the peak in early December.
1.3385 was the high point seen in May and towers above. 1.3350 was a stepping stone on the way and on the way down around the same time.
1.3320 was the high point in late November. Lower, 1.3265 was the high point in mid-November. 1.3225 played a role in capping USD/CAD back in September.
1.3175 was a swing low in late November and it is followed by 1.3125 which was also a low point, earlier in the month.
Below 1.3000 we find the late-October trough of 1.2970. 1.2880 was a double-bottom in September and in August.
I remain bullish on USD/CAD
While the jobs report was a positive shock and the USMCA remains a positive development, the global slowdown and the Fed’s hawkishness will likely weigh on the loonie.
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