USD/CAD Forecast June 24-28 – Canadian dollar streaks to 15-week high

USD/CAD continues to show volatility, declining 1.4% last week. This week’s key event is the monthly GDP report. Here is an outlook for the highlights and an updated technical analysis for USD/CAD.
Canadian consumer spending and inflation numbers were in the spotlight last week. CPI was unchanged at 0.4%, above the estimate of 0.1%. Core CPI, which excludes the most volatile items which comprise CPI, also came in at 0.4%, a three-month high. Retail sales and core retail sales both posted weak gains of 0.1% in April, after strong gains of over 1.1% in March. Earlier in the week, manufacturing sales disappointed with a decline of 0.6% in April, its sharpest drop since December.
In the U.S., a lack of key indicators meant that investor focus was on the Federal Reserve. As expected, the Fed maintained rate levels, but the message from policymakers is that a rate cut is in the works. The Fed hinted at a rate cut in 2020, but it’s noteworthy that eight FOMC members favor a rate cut in 2019. The markets are prepared for a move later this year, with the CME Group pricing in a rate cut in September at 62%. 

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

  1. Wholesale Sales: Tuesday, 12:30. The indicator tends to show strong swings, making accurate predictions a tricky task. In March, wholesale sales jumped 1.4%, crushing the estimate of 0.4%.
  2. GDP: Friday, 12:30. Canada’s GDP reports are released monthly. In March, the economy rebounded with a gain of 0.5%, above the estimate of 0.3%. GDP is expected to slow to 0.2% in April.
  3. RMPI: Tuesday, 12:30. The Raw Materials Price Index is an important inflation index. In April, the index jumped 5.6%, its strongest monthly gain since December 2016. Will we see another strong gain in May?
  4. BoC Business Outlook Survey: Friday, 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.

* All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

With USD/CAD posting sharp losses, we start at lower levels:

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.

USD/CAD broke below 1.3225, which had held in support since early March.

1.3175 was a swing low in late November. This support line was breached late in the week.

1.3125 was a low point earlier in November.

1.3048 has provided support since late October. 1.2916 is next.

1.2831 is the final support level for now.

I am neutral on USD/CAD

The Canadian dollar has showed strong movement in the month of June. What’s next for the currency? The situation in the Persian Gulf remains tense, and a wrong move by Iran or the U.S. could lead to an armed confrontation, which would likely sap risk appetite and hurt the Canadian dollar. On the other hand, the clear message from the Fed that a rate cut is on the way makes the U.S. dollar less attractive to investors.

Follow us on Sticher or iTunes

Further reading:

Safe trading!

Get the 5 most predictable currency pairs

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.

Comments are closed.