The Canadian dollar lost ground early in the week but ended the week almost unchanged. USD/CAD closed the week just above the 1.16 line. It’s a very quiet week leading to the Christmas holiday, with just one release, GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The Fed released an eagerly-awaited policy statement last week. Market analysts noted that previous Fed policy statements have usually stated that the Fed would maintain low rates for a “considerable time”, but the December statement changed terminology, saying the Fed would be “patient” before raising rates. The statement was followed by a hawkish Yellen, with a strong hint that the Fed could raise rates as early as the second quarter of 2015. Unemployment Claims posted another strong release. In Canada, Core CPI softened but Core Retail Sales improved and matched the forecast.
[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- GDP: Tuesday, 13:30. The only event prior to Christmas is one of the most important economic indicators and can have a strong impact on the movement of USD/CAD. Unlike most developed countries, Canada releases GDP on a monthly rather than quarterly basis. In September, GDP bounced back with a respectable gain of 0.4%, matching the forecast. This marked a 4-month high. The estimate for the October reading stands at 0.1%.
* All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.1576 and touched a high of 1.1676, testing resistance at 1.1640 (discussed last week). The pair then reversed directions and dropped to a low of 1.1557. USD/CAD closed the week at 1.1604.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom:
119.75 is the final barrier prior to the psychologically important level of 1.20. This line has held firm since November 2005.
118.72 was a key resistance line in February 2007. It has remained intact since then.
1.1752 marked the start of a rally by the Canadian dollar in February 2007, which saw USD/CAD drop below parity.
1.1640 was tested as the pair broke above this line early in the week before retracting.
1.1487 remains a support line.
1.1340 is providing strong support. 1.1271 is next.
1.1122 marks the low point of a US dollar rally which started late in October and saw USD/CAD climb above 1.14 earlier in November.
1.1053 is the final support level for now. It is providing support above the psychologically important line of 1.10.
I remain bullish on USD/CAD
The sharp drop in oil prices is sure to have a significant effect on the US and Canadian economies. US consumers received a “tax cut” from oil prices, which could translate into stronger consumer spending. Canadian consumers will also benefit, but Canada is a major oil producer, so lower prices could hurt exports and weigh on the Canadian dollar.
In our latest podcast, we run down all aspects of the Fed decision, discuss the running down of oil, the run down Russian ruble and the weak currency down under:
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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.
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