Dollar/CAD may have ended the consolidation phase and is resuming its downtrend. Will it reach new lows? GDP stands out as we turn the page on September. Here are the highlights and an updated technical analysis for USD/CAD.
Canadian wholesales sales disappointed with a drop of 0.5%, significantly worse than expected. However, retail sales provided the necessary fuel for the loonie to push higher. The US dollar suffered from Trump’s controversial talk. Yellen’s lack of hawkishness in Jackson Hole gave another push lower to the pair.
[do action=”autoupdate” tag=”EURUSDUpdate”/]USD/CAD daily graph with support and resistance lines on it. Click to enlarge:
- RMPI: Tuesday, 12:30. The Raw Materials Price Index is yet another measure of inflation and it doesn’t look good. A big drop of 3.7% was seen in June, the fourth consecutive fall. Will it bounce in the report for July? The Industrial Product PRice Index (IPPI) slipped by 1%. A drop of 2.5% is on the cards now in the RMPI. IPPI is predicted to slide by 0.2%.
- Current Account: Wednesday, 12:30. Canada suffers from a current account deficit since the financial crisis. The deficit widened to 14.1 billion in Q1. A similar number is on the cards for Q2. A deficit of 17.2 billion is expected now.
- GDP: Thursday, 12:30. Canada has seen robust growth since the beginning of 2017. The growth rate in May was especially strong with +0.6%. We now get the figures for June, concluding the second quarter. Canada is unique in publishing its economic output on a monthly basis. A modest rise of 0.1% is predicted.
- Manufacturing PMI: Friday, 13:30. Markit’s 400-strong survey has shown consistent growth in the manufacturing sector, with a score of 55.5 points in July. A similar figure is likely for August.
* All times are GMT
USD/CAD Technical Analysis
Dollar/CAD dropped under 1.2580 (mentioned last week) in a sign of CAD strength.
Technical lines from top to bottom:
1.30 is towering above. It is followed by 1.2940 which capped the pair in July.
1.2860 was a relatively significant stepping stone on the way down, holding the pair for some time. It is followed by 1.2775, which marked a recovery attempt.
1.27 is a round number and also the top of a short-lived range. 1.2640 was the bottom of that range and a level where the pair reached after bouncing back.
1.2580 is a pivotal line and capped the pair temporarily on its recovery path. 1.25, a very round number, provided support for the pair in August.
1.2410 is a very strong line, serving as the low for 2017 (so far). Further down, we find levels last seen in early 2015. These levels are 1.22 and 1.20.
I turn bearish on USD/CAD
The Canadian dollar seems to have ended its phase of correction and is ready to continue rising. The Canadian economy is outperforming the American one, and this should push USD/CAD lower.
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Further reading:
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – analysis for dollar/yen
- AUD/USD forecast – projections for the Aussie dollar.
- Forex weekly forecast – Outlook for the major events of the week.
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