USD/CAD Forecast May 7-11 – Can CAD climb back up? Jobs in focus

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Dollar/CAD traded sideways for another week. Is the pair about to resume its rises or is it due for a turnaround? Canada’s jobs report stands out. Here are the highlights and an updated technical analysis for USD/CAD.

The Canadian economy grew by 0.4% q/q in February, better than expected and encouraging after the economy squeezed in January. The Ivey PMI also shot higher to 71.5 points, providing optimism for future growth. Bank of Canada Governor Stephen Poloz repeated his cautious words and did not add anything new. Oil prices helped the loonie stabilize amid a stronger US Dollar. The greenback continued rising despite an unimpressive jobs report: 164K positions gained and a slowdown in wage growth to 2.6% y/y. Nevertheless, the Fed remains on course to raise rates in June and its May decision did not hint otherwise.

Updates:

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

  1. Timothy Lane talks: Monday, 8:00. The BOC Deputy Governor will be attending an event in Portugal and will also answer questions after his speech. Lane may comment on the recent GDP report as well as other aspects of the Canadian economy. The BOC is looking to raise rates but is in no rush whatsoever.
  2. Housing Starts: Tuesday, 12:15. The first housing figure during the week is a relatively stable one. Housing starts are projected to drop from 225K to 218K in April, but this would still be within the averages. Some are worried about the sector, especially as prices in Toronto have dropped sharply.
  3. Building Permits: Wednesday, 12:30. Building approvals are already more volatile. After falling by 2.6% in February, a rise is likely in the report for March. Significant turnarounds are quite common.
  4. NHPI: Thursday, 12:30. The New Home Price Index completes the series of housing figures. The indicator fell by 0.2% last time and is now expected to rise at the same scale. Another fall may trigger worries about the sector.
  5. Canadian jobs report Friday, 12:30. Canada publishes its April jobs report one week after the US, giving it the full stage. The Canadian labor market enjoyed a robust rise in jobs back in March: 32.2K. This time, a more moderate increase is on the cards: 19.5K, closer to regular averages. The BOC is expecting a return to normal levels of growth after a weak first quarter. The unemployment rate is projected to remain unchanged at 5.8%.
  6. Carolyn Wilkins talks: Friday, 13:10. The Senior Deputy Governor of the BOC speaks in Tornonto and has the opportunity to respond to the jobs report. In the past, Wilkins provided the first hint that the BOC was on the way to begin raising rates. Her words are closely watched.

*All times are GMT

USD/CAD Technical Analysis

Dollar/CAD continued trading in range, holding above 1.2810 level (mentioned last week).

Technical lines from top to bottom:

1.3180 was a support line in 2017 and now turns into resistance. 1.3125 is the high point for 2018 so far.

1.30 is a round number that is eyed by many. 1.2945 capped the pair in early April. The round 1.2900 level held the pair back in late April.

1.2810 provided support in late March. 1.2760 was a swing high in late February.

1.2665 was a was a double-bottom in November and works as strong support. It is followed by 1.2615, which provided support in November.

Further below, we find 1.2545, the low point in mid-April. Another round of selling may send the pair towards 1.2450, a swing low in mid-February and 1.2290 is next.

I remain bearish on USD/CAD

An improvement in the Canadian economy, rising oil prices, and a tired US Dollar that has already had its run may send the pair lower.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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