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The Canadian dollar improved last week, as USD/CAD  closed just below the 1.09 level.  This week’s highlights are Wholesale Sales, Core CPI and Core Retail Sales. Here is an outlook on the major events and an updated technical analysis for USD/CAD.

Canadian Housing Starts and Manufacturing Sales both beat  their estimates, and the Canadian dollar took full advantage. In the US,  the news was not as positive, as  retail sales and consumer sentiment numbers softened in  July.

[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily chart with support and resistance lines on it.

Click to enlarge:  USDCAD Forecast AUG18-22

  1. Foreign Securities Purchases:  Monday, 12:30. This indicator is directly linked to currency demand, as foreigners must purchase Canadian dollars in order to buy Canadian securities. The indicator had an outstanding June, jumping to $21.43 billion, a two-year high. This easily beat the estimate of $14.23 billion. The markets are expecting a weaker showing in July, with the estimate standing at $14.68 billion.
  2. Wholesale Sales:  Wednesday, 12:30.  Wholesale Sales jumped 2.2% last month, crushing the estimate of 0.7%. This was the indicator’s sharpest gain since June 2013. The markets are expecting a more modest gain in the upcoming release, of 1.3%.
  3. Core CPI:  Friday, 12:30. Core CPI excludes the more volatile items found in CPI, making it a more accurate gauge of consumer inflation. The index posted a decline of 0.1% last month, its first decline in 2014. Little change is expected in the July reading, with the estimate standing at a flat 0.0%.
  4. Core Retail Sales:  Friday, 12:30. This indicator excludes automobile sales, which are included in Retail Sales and can result in a distorted reading. The indicator slipped to 0.1%, down from 0.7% a month earlier. The markets are expecting   a strong turnaround in July, with a forecast of 0.6%. Will the indicator meet or beat this rosy prediction?
  5. CPI:  Friday, 12:30. CPI had its worst reading of the year last month, slipping   to 0.1%. However, this did match the estimate. The index is expected to post a decline of -0.1%, which would be the indicator’s first negative reading of the year.
  6. Retail Sales:  Friday, 12:30. Retail Sales posted a respectable gain of 0.7% last month, edging above the estimate of 0.6%. Little change is expected in the upcoming release, with an estimate of 0.6%.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD  opened the week at 1.0972 and touched a high of 1.0977. The  Canadian  dollar  then pushed higher. The pair fell to  a low of 1.0860, as support at 1.0815 (discussed last week) remained firm. USD/CAD closed  the week at 1.0894, its lowest level since late July.

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

 

Technical lines, from top to bottom:

We  begin 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 was easily breached as the Canadian dollar recorded strong gains. It has switched to a resistance  role.

1.0815 continues to provide support. It held firm as the pair dropped into the mid-1.08 range.

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  had a good week, but upcoming inflation and retail sales data is expected to be soft.  Unless these numbers show unexpected strength, the US dollar has a good chance of recovering from last week’s losses.

Further reading: