USD/CAD Forecast March 18-22 – Consumer spending, inflation could shake up Canadian dollar

USD/CAD recorded modest losses last week, after two straight winning weeks. In Canada, Consumer data will be in focus, with the release of CPI and retail sales. In the U.S., the Federal Reserve releases its monthly rate statement.  Here is an outlook for the highlights of this week and an updated technical analysis for USD/CAD.

In the U.S., mixed consumer data held the U.S .dollar in check. Core retail sales jumped 0.9%, marking an 8-month gain. However, inflation levels remain sluggish, with CPI coming in at 0.2% and Core CPI at 0.1%. As well, jobless claimed climbed higher than expected. In Canada, manufacturing sales were sharp, with a gain of 1.0%, after three successive declines.

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

1. Foreign Securities Purchases: Monday, 00:30. The indicator provides insights into the flows of funds in and out of the economy. The indicator showed a gaping deficit of C$18.96 billion, compared to the estimate of a surplus of $7.66 billion.
2. Annual Budget Release: Tuesday, Tentative. The Canadian Department of Finance publishes its annual budget, which includes forecasts for growth and inflation. With the economy showing signs of contraction, government revenue may be less than expected, which could sour investors on the Canadian dollar.
3. ADP Nonfarm Employment Change: Thursday, 12:30. The indicator pointed to a sharp rebound in new jobs in February, with a reading of 35.4 thousand.
4. Inflation: Friday, 12:30. CPI posted a weak gain of 0.1% in January, after two straight declines. Core CPI improved to 0.3%, However, other measures of Core CPI, the Trimmed, Media, and Common, remained close to 2%.
5. Retail Sales: Friday, 12:30. Canadian consumers continue to hold tight to the purse strings, which has dampened economic activity. Headline and core releases have both contracted for two straight months. Will we see a rebound in this week’s readings?

*All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

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. Next, 1.3445 was the peak in early December.

1.3385 was the high point seen in May.

1.3350 (mentioned last week) remains relevant and is under pressure in support. XX

Lower, 1.3265 was the high point in mid-November. 1.3225 has held in resistance 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 am neutral on USD/CAD

The Fed will almost certainly hold interest rates at this week’s meeting. Policymakers have been sending dovish messages to the markets, and a cautious rate statement could sour investors on the greenback. At the same time, the Brexit crisis and slow progress in the U.S-China trade talks are weighing on risk sentiment, which could hurt the Canadian dollar.

Further reading:

• EUR/USD forecast  – for everything related to the euro.
• GBP/USD forecast  – Pound/dollar predictions
• USD/JPY forecast  – analysis for dollar/yen
• AUD/USD forecast  – projections for the Aussie dollar.
• Forex+ weekly forecast  – Outlook for the major events of the week.

Safe trading!