USD/CAD Forecast September 16-20 – Canadian dollar slides as U.S. consumer data falters

USD/CAD reversed directions last week, posting slight gains. The upcoming week is busy, with a focus on Canadian inflation and retail sales reports. Investors will also be keeping a close eye on the Federal Reserve, which will release its rate decision. Here is an outlook at the highlights and an updated technical analysis for USD/CAD.
In Canada, the focus was on construction data. Housing starts improved to 227 thousand, easily beating the estimate of 213 thousand. Building permits rebounded with a strong gain of 3.0%, after posting back-to-back declines.
Over in the U.S., consumer inflation reports were a mixed bag. CPI slipped to 0.3%, down from 0.1%, but this matched the estimate. Core CPI remained steady at 0.3%, edging above the forecast of 0.2%. The week wrapped up with retail sales, which slowed considerably in August. Retail sales fell to 0.4%, down from 0.7% a month earlier. Core retail sales slowed to zero, compared to 1.0% in the previous release. It was the first time that core retail sales failed to record a gain since March.

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

USD/CAD 1-Day Chart

  1. Foreign Securities Purchases: Monday, 12:30. Demand for domestic securities has been swinging wildly, resulting in forecasts which have been off the mark. In July, demand slipped by C$3.9 billion, after a strong gain of C$10.20 billion a month earlier. We will now receive the August data.
  2. Manufacturing Sales: Tuesday, 12:30. Manufacturing sales has been struggling, with two declines in the past three months. In June, the indicator declined 1.2%, its sharpest decline in six months. The markets are braced for another decline, with an estimate of -0.3%.
  3. Inflation: Wednesday, 12:30. CPI was unexpectedly strong in July, with a gain of 0.5%. This easily beat the estimate of 0.1%. However the estimate for August stands at -0.3%.. Core CPI gained 0.3% in July, up from zero in the previous release. Will we see a stronger reading in August?
  4. ADP Nonfarm Employment Change: Thursday, 12:30. The ADP report sparkled in July with a gain of 73.7 thousand and the official NFP report followed suit with a sharp gain of 81.1 thousand. The August ADP reading is next.
  5. Retail Sales: Thursday, 12:30. Retail sales have been sluggish in recent months and dipped to zero in June. Still, this was above the estimate of -0.3%. Investors are expecting a rebound in July, with an estimate of 0.2%. Core retail sales jumped 0.9% in June, rebounding from -0.3% in May. A much smaller gain of 0.2% is the estimate of July.

USD/CAD Technical Analysis

Technical lines from top to bottom:

We start with resistance at 1.3630. 1.3565 is next.

1.3445 has held in resistance since the first week of June. This is followed by 1.3385.

1.3350 is the next resistance line.

1.3265 is an immediate support line. It could see action early in the week. 1.3175 is next.

1.3125 (mentioned last week) has provided support since the end of July.

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

1.2916 has held firm since October.

1.2830 is the final support line for now.

I remain bullish on USD/CAD

Global economic conditions and the ongoing trade war between the U.S. and China and turmoil in the Middle East could weigh on risk 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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