USD/CAD Forecast June 17-21 – Canadian dollar slides, U.S. retail sales improve

USD/CAD rebounded last week, posting considerable gains. The upcoming week is busy, with Canada releasing manufacturing sales and consumer spending and inflation data. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.
Canadian construction numbers were in focus last week. Housing starts slipped to 202 thousand in May, down from 235 thousand a month earlier. Building permits impressed with a gain of 14.3%, its sharpest monthly gain in over three years.
In the U.S., May inflation numbers were soft, as CPI and core CPI came in at 0.1%. As expected, U.S. consumer spending data improved sharply in May. Core retail sales climbed 0.5%, matching the estimate. Retail sales also improved to 0.5%, but fell shy of the forecast of 0.7%. These consumer inflation and consumer spending numbers could play a crucial role in the Federal Reserve’s forward guidance for rates. The markets are prepared for rate cuts in the second half of the year. The CME Group has set the odds of a July cut at 62% and another cut in September at 55%. 

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

  1. Foreign Securities Purchases: Monday, 12:30. The indicator declined by C$1.49 billion in March, well off the estimate of C$11.55 billion. This marked the first decline in three months. Will we see a rebound in April?
  2. Manufacturing Sales: Tuesday, 12:30. This key manufacturing event jumped 2.1% in March, well above the estimate of 1.5%. The April estimate stands at 0.6%.
  3. CPI: Wednesday, 12:30. CPI is the primary gauge of consumer inflation. The indicator slowed to 0.4% in April, matching the forecast. The markets are braced for a weak gain of 0.1%. Core CPI, which excludes the most volatile items that are included in CPI, fell to zero in April. Another soft reading is expected.
  4. ADP Nonfarm Employment Change: Thursday, 12:30. Canada’s job creation numbers have been strong, and the ADP nonfarm payrolls posted an excellent gain of 61.7 thousand in May. Another strong reading would be a sign that the labor market is in good shape.
  5. Retail Sales Data: Friday, 12:30. Retail sales reports improved in March. Retail sales climbed 1.1%, while the core release jumped 1.7%, its strongest gain in over two years. April is projected to show weaker consumer spending. The estimate for retail sales is 0.3% and for core retail sales 0.6%.

* All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

With USD/CAD posting strong gains, we start at higher levels:

1.3915 was an important resistance line back in February 2016.

1.3757 has held in resistance since May 2017.

1.3660 was the high point for USD/CAD in December.

1.3547 capped USD/CAD in June 2017. 1.3445 (mentioned last week) has weakened in resistance.

The pair broke through resistance at 1.3385 late in the week. Close by is 1.3350.

1.3265 has some breathing room in support after strong gains by USD/CAD last week.

1.3225 has held in support since early March. 1.3175 was a swing low in late November.

1.3125 was a low point earlier that month.

1.3048 has provided support since early November.

I remain bullish on USD/CAD

Geopolitical tensions in the Middle East and the ongoing trade war between the U.S. and China are weighing on risk appetite, which makes minor currencies like the loonie less attractive to investors.

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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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