Looking for the latest outlook for this week? Check the full section: Canadian Dollar Forecast.
The Canadian dollar managed to remain stable in another week of greenback strength. The upcoming week contains important inflation figures and 7 more events that will shape the loonie’s direction. Here’s an outlook for the upcoming week, and an updated technical analysis for USD/CAD.
USD/CAD chart with support and resistance lines marked on it. Click to enlarge:
Excellent housing figures, especially building permits, that were far better than expectations, helped the loonie rise. Let’s see the events that will shape this week. The technical analysis will follow:
- Capacity Utilization Rate: Canada suffered from drops in the utilization rate of resources since Q4 of 2007. It reached a bottom of 67.4% in the last quarter and is finally expected to rise to 67.7% this time. A stronger rise will help the loonie. Published on Monday at 13:30 GMT.
- Labor Productivity: Productivity surprised last quarter by remaining unchanged. Higher productivity isn’t good for the currency, as it translates into lower wages. The report that will be published on Tuesday at 13:30 reflects Q3. A drop of 0.4% is expected.
- Leading Index: This composite index is built from 10 economic indicators – some already released. Even so, this figure has surprised in recent months, usually to the upside. After a rise of 0.7% last month, it’s expected to post a similar 0.6% rise this time. Note that most initial reads have been revised to the upside as well. Published on Tuesday at 13:30 GMT, together with the Labor Productivity.
- Manufacturing Sales: This indicator is quite unstable. Sales by manufacturers can rise or fall by 6%. Last month’s release showed a nice 1.4% growth, after a larger drop of 2.1% in the previous month. A modest 0.4% rise is predicted, but learning from the past, the scale will probably be different. Published on Wednesday at 13:30 GMT.
- Mark Carney talks: The governor of the central bank made a rather uninteresting rate decision last week, after disappointing last month. He’ll make a public appearance on Wednesday at 18:05 in Toronto and might elaborate on the current economic conditions and the prospects for the future. He tends to move the loonie.
- CPI: In the past four months, Canadian prices haven’t risen. This fact makes a rate hike impossible. After another disappointing drop of 0.1% last month, prices are expected to rise by 0.4% this time for a change. Core CPI, which excludes volatile items, did rise in the past 3 months. The 0.1% rise last month is expected to be followed by a rise in the same scale this time. Published on Thursday at 12:00 GMT.
- Foreign Securities Purchases: This is the net value of stocks and other financial instruments that were purchased by foreigners in the past month. Foreigners believe in Canada: in the past two months, they invested much more than was predicted, passing 13 billion last month. This number is expected to ease this time to 13.59 billion. Published on Thursday at 13:30.
- Wholesale Sales: This figure is similar to the retail sales, but takes one step backwards – looking at the wholesalers. Sales have only risen slightly in Canada last month – by 0.2%. This followed a dip. Another rise of 0.2% is expected this time. Published on Friday at 13:30 GMT.
USD/CAD Technical Analysis
USD/CAD traded between 1.04 and 1.0670, closing slightly higher this week, at 1.06. The 1.06 resistance line, which was important in last week’s outlook, was breached this week, and its importance is smaller.
Looking up, 1.0750 was the peak in recent weeks, and serves as the first resistance line. Above that, 1.0850 was a peak in November and is the next line of resistance. Beyond this line, 1.1130 was tested during August more than once, and serves as a major resistance line.
Below, 1.04 was successfully tested and now serves as a major support line. Below this, 1.02 was the year-to-date bottom, and serves as another support line. Parity lies below, but it isn’t close.
I remain neutral on USD/CAD.
Canada has a strong arsenal to withhold the greenback’s strength: excellent employment numbers and impressing housing figures. This is good for stability, but not for gains.
Further reading:
- For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
- For the Euro, read the EUR USD Forecast.
- For GBP/USD, look into the British Pound forecast.
- For the Australian dollar, read the AUD/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
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