Dollar/CAD had an interesting week, enjoying a calmer atmosphere at first but suffering some turbulence later on. What’s next? The all-important rate decision by the BOC is in the limelight. Here are the highlights and an updated technical analysis for USD/CAD.
Oil prices continued climbing and trade tensions remained calm for a while, providing some stability for the Canadian Dollar. However, the week ended with quite a bit of action with both jobs reports. Canada reported a big gain of 31.8K positions in June but wage growth slowed down from 3.9% to 3.5%. A similar picture was seen in the US, with 213K positions gained but with salaries stagnating at 2.7% y/y.
Update: USD/CAD looks stable around 1.31 alongside the stability in oil prices and in markets. Calm around trade is positive for the C$. The BOC raised rates as expected and maintained the bullish bias. They intend to increase rates. However, they mentioned trade so many times and seem very concerned about the topic. This sent the pair up after it inially fell.Updates:
- Jul 20, 8:19: AUD, CAD: Not A Clear Buy Yet But Look Cheap: EUR/USD: Range Holds – SocGen: Where are commodity currencies going? And the euro? Here is their view, courtesy of eFXdata: Societe Generale Cross Asset Strategy...
- Jul 19, 10:16: EUR/USD is closer to a breaking point: The EUR/USD is on the back foot, repeating the pattern from yesterday. Markets are watching the trade spat between the...
- Jul 19, 8:08: USD: Set To Remain Bid On Trade War; EUR/USD Vulnerable To Slide Towards 1.15 – Danske: EUR/USD has been pressured but always manages to recover. What’s next? Trade wars will have the impact. Here is their...
- Jul 18, 9:53: Powell pressures EUR/USD and more could come: The EUR/USD is trading on lower ground, with Powell’s power driving it down. The second day of Powell’s testimony is...
- Jul 18, 8:53: Easier falling than rising for EUR/USD: The EUR/USD is trading lower as the US Dollar sweeps the board. While it has some room to recover, the path of...
- Jul 18, 8:09: EUR/USD: In 1.1550-1.1850 Range; Dips Attractive Around Current Levels – TD: EUR/USD is under pressure, trading in the lower end of the range. What’s next? Here is their view, courtesy of...
- Jul 17, 11:06: No news is good news for the Euro. Again.: The EUR/USD is extending its very gradual climb, breaking above downtrend resistance. Powell’s testimony may trigger much more significant moves....
- Jul 17, 8:02: EUR/USD: In 1.15-1.1850 Game; Failed At The Tip & En-Route To Fail At The Bottom – SocGen: EUR/USD is trading in a narrow range for quite some time. What’s next? Here is their view, courtesy of eFXdata:...
- Jul 16, 17:25: EUR/USD has limited room to rise as downtrend resistance looms: The EUR/USD is trading within well-known ranges. US Retail Sales and concerns about trade top the agenda. The technical picture...
- Jul 16, 8:10: Can EUR/USD rise? It has clear targets up and down: The EUR/USD is looking for a new direction as traders shift their attention back to trade after France won the World Cup....
USD/CAD daily graph with support and resistance lines on it. Click to enlarge:
- Housing Starts: Tuesday, 12:15. The annualized level of housing starts dropped sharply in May below 200K to 196K. It is also far off the highs. A level of 195K is on the cards now.
- Building Permits: Tuesday, 12:30. Similar to the previous figure, also the number of building consents dropped, by 4.6%, and the figure is for April. We will now get the figures for May which could see a bounce back up in this volatile indicator.
- Canadian rate decision: Wednesday, 14:00, press conference at 15:15. The Bank of Canada laid down heavy hints that it is about to raise rates in this all-important July meeting, which also consists of new forecasts and a press conference by Governor Stephen Poloz and Deputy Carolyn Wilkins. The economy has shown signs of picking up in the second quarter and the most encouraging data point is the increase in wages. However, trade relations with the US have deteriorated since their last meeting. The US imposed tariffs on steel and aluminum and Canada retaliated. Nevertheless, it seems that the BOC will dismiss this source of uncertainty at the moment and hike from 1.25% to 1.50%. A lot depends on the post-decision press conference. A hint that the tightening cycle is over, for now, could send the C$ down despite the rate increase. Optimism about the economy could send the loonie higher.
- NHPI: Thursday, 12:30. The New House Price Index remained flat in April, worse than predictions. The third and last housing figure for the week could go either way in May. An increase of 0.2% is projected now.
*All times are GMT
USD/CAD Technical Analysis
Dollar/CAD saw a gradual slide towards the 1.3125 level (mentioned last week).
Technical lines from top to bottom:
1.3795 capped the pair last April. 1.3560 capped the pair back in May 2017 and is a high point.
1.3385 was the high point on two occasions in late June. 1.3350 follows close by after serving in both directions in July 2017.
1.3255 was a line of support when the pair traded on high ground in late June.
1.3125 is the high point for 2018 until it was broken. 1.3065 was the high point in May and also earlier in the year.
1.30 is a round number that is eyed by many. 1.2920 capped the pair in late April and early May as well. 1.2820 served as support in early May.
I remain bullish on USD/CAD
Even if the BOC raises rates, they cannot ignore the trade tensions for too long. A signal that they are in a “wait and see” mode from now on could weigh on the loonie.
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