USD/CAD Forecast Oct. 26-30 – BoC, GDP could shake up loonie

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USD/CAD reversed directions last week and rose 0.50 percent. There are three events in the upcoming week, including the Bank of Canada rate decision and GDP. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

The Bank of Canada Business Outlook Survey stated that the economic recovery will be uneven, with some industries recovering ahead of others. Consumer inflation dipped by 0.1% for a second straight month. However, Core CPI improved from 1.7% to 1.8%.

Retail sales were a mix in August. The headline released dropped to 0.6%, down from 0.4%, but the core reading rebounded to 0.5%, up from -0.4%.

In the US, jobless claims sparkled, falling to 787 thousand, down from 898 thousand beforehand. This was the lowest level since March, prior to the spread of Covid-19, which sent unemployment levels skyrocketing. Manufacturing PMI came in at 53.3, just shy of the estimate of 55.5 points. The Services PMI improved to 56.0, beating the estimate of 54.7 points. Both readings indicate expansion, above the 50-level which separates contraction from expansion.

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

  1. BoC Rate Decision: Wednesday, 12:30. The Bank of Canada slashed rates to 0.25% in March has maintained this level. With the economy showing signs of a recovery, the central bank is not expected to make any changes. If the rate statement indicates that members are optimistic about economic conditions, the Canadian dollar could improve.
  2. GDP: Friday, 12:30. Canada releases its GDP reports on a monthly basis. In July, the economy slowed to 3.0%, down from 6.5% beforehand. We now await the August release, which should be treated as a market-mover.
  3. Raw Materials Price Index: Friday, 12:30. This inflation index has slowed considerably since May, which showed a gain of 16.4%. The August reading came in at 3.2%, well below the estimate of 6.5%. Will we see an improvement in the September release?
  • All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

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

1.3330 is next.

1.3230 was tested late last week.

1.3149 has switched to a support role after USD/CAD posted gains last week.

1.3016 is next.

1.2935 has provided support since October 2018.

1.2841 is the final support level for now.

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I am neutral on USD/CAD

With the Bank of Canada announcement and the GDP release, traders should be prepared for some volatility from USD/CAD this week. As well, the looming US election could affect the movement of the pair.

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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.

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