The Canadian dollar posted modest losses last week, as USD/CAD closed at 1.0971. Will the pair break above the 1.10 level? This week’s highlight is Manufacturing Sales. Here is an outlook on the major events and an updated technical analysis for USD/CAD.
Canadian Building Permits and Ivey PMI were up sharply in July, but any chance of the Canadian dollar making inroads against the greenback were dashed with a dismal Employment Change on Friday. In the US, ISM Non-manufacturing PMI and Unemployment Claims were excellent, as the US recovery continues.
[do action=”autoupdate” tag=”USDCADUpdate”/] USD/CAD daily chart with support and resistance lines on it.- Housing Starts: Wednesday, 12:15. Housing Starts has been very steady, with the past two readings coming in at 198 thousand. Both of these readings beat the forecast, indicative of stronger than expected activity in the construction industry. The markets are expecting another strong release, with the July estimate standing at 194 thousand.
- NHPI: Thursday, 12:30. The New Housing Price Index is an important gauge of activity in the housing sector, which is an important engine of economic growth. Like other Canadian inflation indicators, NHPI continues to hover at low levels. The July release came in at just 0.1%, shy of the estimate of 0.3% and a five-month low. Little change is anticipated in the upcoming reading, with the estimate standing at 0.2%.
- Manufacturing Sales: Friday, 12:30. This is the key event of the week. The indicator has posted gains for most of 2014, and had an excellent gain of 1.6% last month, its best showing in close to a year. The markets are expecting a downturn in July, with the estimate standing at 0.5%. Will the indicator repeat with another strong gain this month?
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0923 and quickly dropped to a low of 1.0903. The Canadian dollar then reversed directions, touching a high of 1.0986, as breaking past resistance at 1.0945 (discussed last week). USD/CAD closed the week at 1.0971, its highest weekly closing since late April.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom:
We start with resistance at 1.1494. This line has remained intact since November 2006, when the US dollar broke through and continued to rally to a high above the 1.18 line.
1.1369 was breached in October 2008 as the US dollar posted sharp gains, climbing as high as the 1.21 level. This line has remained steady since July 2009.
1.1278 has provided resistance since March. This line marked the start of a rally by the Canadian dollar, which dropped below the 1.09 level.
1.1123 remains a strong resistance line.
1.1054 marked an important resistance line in April and has held firm since then.
1.0944 has reverted to a support level as the pair trades at higher levels. It is currently a weak line and could see further action early in the week.
1.0815 continues to provide strong support as USD/CAD trades close to the 1.10 level.
1.0737 marked a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory.
1.0621 marked a low point for the pair in early July. The US dollar has improved sharply since then, as the pair trades close to 1.10.
1.0526 has been a strong support line since late November.
1.0422 was a key support line in mid-November. This is the final line for now.
I am bullish on USD/CAD
The Canadian dollar continues to travel south, as the currency is trading at its weakest levels since April. US numbers have been strong, but the Canadian economy has not been able to keep pace, as underscored by weak employment numbers last week.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar.