The Canadian dollar posted minor losses last week, as USD/CAD closed slightly below the 1.31 line. There are only five events this week, but all are major indicators. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The Canadian dollar weakened late in the week following a disappointing GDP reading of -0.2%, its fourth decline in the past five readings. In the US, the Federal Reserve remained cautious but did acknowledge improvement in the US economy. Advance GDP rebounded with a gain of 2.6% in Q2, but this fell short of the estimate.Updates:
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- Trade Balance: Wednesday, 12:30. Canada continues to post trade balance deficits, with the May reading coming it at C$-3.3 billion. This was worse than the forecast of C$-2.6 billion. The markets are expecting better news in the June reading, with an estimate of C$-2.1 billion.
- Building Permits: Friday, 12:30. Building Permits tends to show a lot of volatility, leading to readings which are often far off from the estimates. This was the case in May, when the indicator plunged 14.5%. The markets had expected a decline of only -5.2%. June should bring better news, with an estimate of +2.6%.
- Employment Change: Friday, 12:30. This is one of the key economic indicators, and an unexpected reading can have a significant impact on the movement of USD/CAD. After an outstanding reading in May, the indicator disappointed in May, with a decline of 6.4 thousand. However, the markets are anticipating a strong turnaround, with a forecast of 5.7 thousand. Canada’s unemployment rate has not budged from 6.8% since January, and no change is expected in the upcoming reading.
- Ivey PMI: Friday, 14:00. The index has posted readings well above the 50-point line since April, indicative of steady expansion. Little change is expected in the July reading, with a forecast of 56.2 points.
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.3042 and slipped to a low of 1.2857. The pair then reversed directions, climbing to a high of 1.3092, breaking above resistance at 1.3063 (discussed last week). USD/CAD closed the week at 1.3086.
Live chart of USD/CAD:
Technical lines, from top to bottom
We start with resistance at 1.3443.
1.3346 has held firm since August 2004.
1.3165 is the next line of resistance.
1.3063 is protecting the symbolic line of 1.30.
1.2924 was tested in support for a second straight week, as the pair dipped before recovering.
1.2798 is the next line of support.
1.2673 marked the start of the current greenback rally which has seen the pair push close to the 1.31 level.
1.2541 is the final support level for now.
I am bullish on USD/CAD
The Canadian dollar continues to struggle against its US counterpart, and we could see the pair continue to rise if key indicators such as Employment Change do not meet expectations. The Fed is keeping a low profile but speculation remains high that rates will rise, perhaps as early as September.
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- 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.
- For the kiwi, see the NZDUSD forecast.