USD/CAD Forecast November 4-8 – Canadian dollar dips on dovish BoC

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The Canadian dollar was down considerably last week, as USD/CAD pushed above the 1.31 level. This week’s key events are employment releases and Ivey PMI. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
The Bank of Canada stayed on the sidelines last week, as the benchmark rate remained pegged at 1.75%. The bank also lowered its growth forecast to 1.6%, so there will be pressure on the BoC to consider reducing rates before the end of the year. Canadian GDP came in at 0.1%, shy of the forecast of 0.2%.
In the U.S, the initial GDP for Q3 was stronger than expected. The economy gained 1.9%, beating the forecast of 1.6%. As expected, the Federal Reserve trimmed rates for a third straight time, but the Canadian dollar was unable to take advantage. Employment numbers were mixed. Wage growth improved to 0.2%, up from 0.0%. However, this fell short of the forecast of 0.3%. Nonfarm payrolls slipped to 128 thousand, but this beat the forecast of 90 thousand.

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

  1. Trade Balance: Tuesday, 13:30. Canada has posted two straight trade deficits. The deficit showed little change in August, with a reading of C$1.00 billion. Will we see another deficit in September?
  2. Ivey PMI: Wednesday, 15:00. The index dropped to 48.7 in September, done sharply from 60.6 a month earlier. This marked the first contraction since May 2016. Another weak reading is expected, with an estimate of 49.3 points.
  3. Employment Data: Friday, 13:30. The economy created 53.7 thousand jobs in September, pointing to a strong labor market. The unemployment rate dipped to 5.5%, marking a 4-month low. We will now receive the September numbers.
  4. Building Permits: Friday, 13:30. Building permits tends to show strong swings, which often results in forecasts that are off the mark. The indicator posted a strong gain of 6.1% in August, well above the estimate of 2.3%. We now await the September release.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3445. This line has remained intact since the first week of June.

1.3350 has held since early September. 1.3265 is next.

1.3175 is an immediate resistance line.

1.3125 (mentioned last week) remains relevant and has switched to a support role.

1.3048 is protecting the round number of 1.3000, which has psychological significance.

1.2916 was last tested in October 2018.

1.2830 is next.

1.2730 is the final support line for now.

I am neutral on USD/CAD

Oil prices remain on the low side, which could weigh on the Canadian currency. At the same time, risk appetite has been steady, which is bullish for minor currencies like the Canadian dollar.

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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.