USD/CAD Forecast Nov. 2-6 – US dollar soars, all eyes on US election

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USD/CAD climbed sharply last week, with gains of 1.4%. This was the sharpest 1-week gain since March. There are four events in the upcoming week, including Employment Change. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

The Bank of Canada maintained interest rates at 0.25% and signaled that it would not hike rates before 2023. The central bank also tweaked QE, lowering assets from “at least” C$5 billion/week to “at least” C$4 billion/week. Canada’s GDP showed a gain of 1.2% in August, down from 3.0%. Still, this beat the estimate of 0.9%. On the inflation front, the Raw Materials Price Index declined by 2.2% in September, the first decline in five months. The reading was well short of 0.3%.

In the US, durable goods orders improved sharply in September. The headline reading soared to 1.9%, up from 0.4%. This crushed the estimate of 0.5%. The core reading improved to 0.8%, up from 0.4%. Advance GDP jumped 33.1% in Q3 its strongest quarter on record. However, it barely recouped the Q2 loss of 31.4%. There was more good news on the employment front, as jobless claims fell to 751 thousand, down from 787 thousand beforehand. Core PCE Price Index, the preferred inflation gauge of the Federal Reserve, edged down to 0.2%, down from 0.3%.

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

  1. Manufacturing PMI: Monday, 14:30. The manufacturing sector recovered nicely in Q3, as the index crossed into expansion territory with readings above the 50-level. The PMI accelerated to 56.0 in September, up from 55.0 beforehand. Will the upswing continue in October?
  2. Trade Balance: Wednesday, 13:30. Canada continues to produce trade deficits. The trade deficit in August came in at C$-2.4 billion, little changed from the previous reading of C$-2.5 billion. 
  3. Employment Report: Friday, 13:30. Job creation remains strong. In September, the economy created 378.2 thousand jobs, up from 245.8 thousand and well above the estimate of 150.0 thousand. The unemployment rate dropped to 9.0% in September, down from 10.2%. We now await the November data, which could affect the movement of USD/CAD.
  4. Ivey PMI: Friday, 15:00. Ivey PMI remains in expansionary territory, but slowed to 54.3 in September, which was down sharply from the August release of 67.8 points. This marked a 4-month low. The October estimate stands at 55.2 points.
  • All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

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With USD/CAD recording strong gains last week, we start at higher levels:

1.3672 has held in resistance since late June.

1.3496 is next.

1.3420 (mentioned last week) has held in resistance since the first week in August.

1.3330 is an immediate resistance line.

1.3260 is the first line of support.

1.3137 is next.

1.3014 is the final support level for now.

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I am neutral on USD/CAD

We can expect some volatility from USD/CAD next week, with the US election taking center stage. If the election results are contested, the uncertainty could spook investors and boost the safe-haven US dollar.

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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.