USD/CAD Forecast Sep. 28-Oct. 2 – Greenback flexes muscles

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USD/CAD jumped 1.4% last week, its best week since March. There are three events next week, including GDP. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.

It was a very light calendar in Canada last week, with one tier-2 event. The New Housing Price Index edged up to 0.5% in August, up from 0.4% beforehand. This marked its highest level since June 2017.

In the US, Federal Reserve Chair Powell had a busy week testifying on Capitol Hill. Powell reiterated that the Fed was using all available tools to support the budding economic recovery. He also called on Congress to provide additional fiscal stimulus.

The US Flash Manufacturing PMI for September came in at 53.5, almost unchanged from 53.4 a month earlier. Importantly, the reading beat the estimate of 52.5 points. The index has been in expansion territory for four straight months, with readings above the 50-level, which separates expansion from contraction. On the services front, Flash Services PMI came in at 54.6, just shy of the previous release of 54.8 points. The respectable reading points to a solid rise in business activity, another sign that the economic recovery is strengthening.

The week ended on a sour note, as durable goods orders disappointed. The headline and core readings both slowed to 0.4%, in August. In July, the headline reading was 11.2%, while the core figure was and 2.4%.

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

  1. Raw Materials Price Index: Tuesday, 12:30. This inflation index continues to slow, but remains in positive territory. In July, the index slowed to 3.0%, down from 7.5% beforehand. We now await the August data.
  2. GDP: Wednesday, 12:30. Canada releases GDP on a monthly basis. The economy has improved, with GDP climbing to 6.5% in June, up from 4.5% in May. The estimate for July stands at 2.9%.
  3. Manufacturing PMI: Thursday, 12:30. The PMI has accelerated for four straight months and improved to 55.1 in August, up from 52.9. The 50-level separates expansion from contraction. Will the upswing continue in the September release?
  • All times are GMT

USD/CAD Technical Analysis

Technical lines from top to bottom:

With USD/CAD recording sharp gains, we begin at higher levels.

1.3780 has been a key monthly resistance line.

1.3598 is next.

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

1.3330 has switched to support following strong gains by USD/CAD last week.

1.3230 has some breathing room in support.

1.3149 is next.

1.3016 is the final support level for now.

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I remain neutral on USD/CAD

The US dollar resumed its winning ways last week. The US economy is showing signs of recovery, but Covid-19 continues to hamper economic activity. Investors remain cautious, which could weigh on minor currencies like the Canadian 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.

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