USD/CAD Forecast July 6-10 – Canadian Dollar Jumps Despite GDP Crash

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USD/CAD gained 1 percent last week, its best weekly gain in a month. 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.

In Canada, building permits rebounded with a sharp gain of 20.2%, crushing the estimate of 10.3 percent. This follows back-to-back declines. The Raw Materials Price Index posted a gain of 16.4% in May, the first gain since January. Canada’s GDP contracted by 11.6% in April, after a decline of 7.2% beforehand.

In the U.S., manufacturing improved sharply, as Manufacturing PMI climbed from 39.8 to 49.6 points. The estimate stood at 50.0, which separates contraction from expansion. Durable goods orders sparkled in May. The headline figure climbed 4.0%, rebounding after a decline of 7.4 percent. The core reading surged 15.8%, rebounding from a read of -17.2% beforehand. The Conference Board consumer confidence index jumped from 85.9 to 98.1 and easily beat the estimate of 91.6 points. Nonfarm payrolls shot up in June, with a gain of 4.80 million. This comes after a May release of 2.509 million. Unemployment claims dropped from 1.48 million to 1.42 million, higher than the estimate of 1.35 million.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
  1. BoC Business Outlook SurveyMonday, 14:30. This well-respected survey looks at a wide range of business conditions, including spending and hiring expectations. It should be treated as a market-mover.
  2. Ivey PMITuesday, 14:00. The PMI has improved dramatically in May, climbing from 22.8 to 39.12 points. The uptick is expected to continue in June, with an estimate of 50.2 points. The 50-level separates contraction from expansion.
  3. Housing StartsThursday, 12:15. Housing starts improved to 193 thousand in May, up sharply from 171 thousand. This easily beat the estimate of 160 thousand. The June estimate stands at 185 thousand.
  4. Employment Report: Friday, 13:30. Canada’s economy rebounded from a loss of over 1.99 million jobs in April, with a gain of 289.6 thousand in May. Analysts are expecting better numbers in June, with a forecast of 550.0 thousand. The unemployment rate climbed from 13.0% to 13.7% in May, but this beat the forecast of 15.0%. The estimate for June is 12.5 percent.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at the round number of 1.39. This line has been a resistance line since late May. 1.3757 is next.

1.3661 (mentioned last week) has switched to a resistance role after losses by USD/CAD last week.

1.3550 is an immediate resistance line.

1.3420 is providing support.

1.3330 is next.

1.3265 is the final support level for now.

I am neutral on USD/CAD

The Canadian dollar lost close to 5 percent in March but has since recovered much of these losses. The U.S dollar is a traditional safe-haven in times of crisis, but investors continue to show a willingness to buy minor currencies like the Canadian dollar.

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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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