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USD/CAD  reversed directions last week, gaining about 80 points.  The pair closed the week at 1.2558. This week’s major events are  Manufacturing Sales,  Core  CPI and Core Retail  Sales.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Canadian employment numbers  were stronger than expected,  which gave a small boost to the Canadian dollar.  In the US, employment numbers were very positive last week. JOLTS Job Openings improved and the 4-week jobless claims was the lowest since 2000.

[do action=”autoupdate” tag=”USDCADUpdate”/]

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

USD_CAD_Forecast.Apr 13-17

  1. Manufacturing Sales: Wednesday, 13:30. This is the first key event of the week. The indicator has struggled recently, with three releases in the past four releases. The February reading came in at -1.7%, weaker than the forecast of -1.1%. A small decline is expected in March report, with an estimate of -0.2%.
  2. BOC Monetary Policy Report: Wednesday, 15:00. This quarterly report  discusses  the key factors that the BOC takes into account when determining its monetary policy and interest rate decisions. The report should be treated as a market-mover. A press conference will follow, hosted by BOC Governor Stephen Poloz.
  3. BOC Overnight Rate: Wednesday, 15:00. The  BOC shocked the markets in January, with a surprise  cut that lowered rates to 0.75%. No change is expected in the upcoming rate decision, which will be announced via a rate statement.
  4. Core CPI: Friday, 13:30. Core CPI is the most important inflation indicator,  and an unexpected reading can have a significant impact on the direction of USD/CAD. The index improved to 0.6% in February, matching expectations. This was the indicator’s best performance since February 2014. The markets are expecting a softer release in March, with an estimate of 0.3%.
  5. Core Retail Sales: Friday, 13:30. Core Retail Sales excludes automobile sales, which tend to be volatile and distorts the underlying trend. The indicator has looked weak, posting two straight declines. The January release came in at -1.8%, much lower than the estimate of -0.4%. The markets are expecting a strong turnaround in the February report, with a forecast of +0.5%.
  6. CPI: Friday, 13:30. After three consecutive declines, the index pushed into positive territory in January, posting a strong gain of 0.9%, within expectations. The estimate for the February reading stands at 0.5%.
  7. Foreign Securities Purchases: Friday, 13:30. This indicator is closely linked to currency demand, as foreigners must purchase domestic securities   with Canadian dollars. The indicator rebounded strongly in January, with a  gain of C$5.73 billion, well above the estimate of  -C$1.95 billion.
  8. Retail Sales: Friday, 13:30. Retail Sales is the primary gauge of consumer spending. In January, the indicator posted a decline of -1.7%, well of the estimate of -0.7%. The markets are expecting a small gain of 0.2% in the February reading.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.2477 and  dropped to a low  of 1.2386, testing support at 1.2387 (discussed last week). The pair then reversed directions and climbed all the way to 1.2667 late in  the week. However, the pair was unable to consolidate at  these levels and  retracted, closing the week at 1.2558.

Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]

Technical lines, from top to bottom

We begin with resistance at 1.2924. This line was last tested in March 2009.

1.2798 is a strong resistance line.

1.2624 held firm as the pair reached a high of 1.2621.

1.2541 has switched to a support role as the USD/CAD posted gains during the week. This is a weak line which could see further action early in the week.

1.2387  was tested in support but recovered and  is providing strong support.

1.2230 has held firm since mid-January.

1.2114 is the final support line for now.

I am bullish on USD/CAD

US employment data rebounded nicely  last week following  the  dismal NFP report. If  key Canadian data such as Manufacturing Production does not post strong numbers, the US dollar rally could continue.

In this week’s podcast, we discuss: USDown or greenback comeback? And also touch other topics:

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Further reading: