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The Canadian dollar lost over 100 points last week, as USD/CAD tested the 1.20 line. This was its highest level since May 2009. The pair closed the week at 1.1975. There are 8 events this week, highlighted by Core Retail Sales and Core CPI. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

In the US, last week’s data did not impress, as manufacturing and employment numbers disappointed. Still, consumer confidence continued to push higher, as the US consumer is optimistic about the economy. There only Canadian release last week, the BOC Business Outlook Survey, reported that business confidence had weakened since the previous survey in the fall of 2014.

[do action=”autoupdate” tag=”USDCADUpdate”/]

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:

USD_CAD Daily Jan19-23

  1. Foreign Securities Purchases: Monday, 13:30. This indicator is linked to currency demand, as foreigners must purchase Canadian securities with Canadian dollars. The indicator improved in October to C$9.53 billion, well above the estimate of C$5.21 billion. The November estimate stands at C$7.23 billion.
  2. Manufacturing Sales: Tuesday, 13:30. This is the first key event of the week. The indicator sagged in October, posting a decline of 0.6%. This was slightly lower than the estimate of -0.4%. Little change is expected, with a November forecast of -0.5%.
  3. Wholesale Sales: Wednesday, 13:30. Wholesale Sales is an important indicator of consumer spending. The October release came in at just 0.1%, far short of the estimate of 0.9% and a 3-month low. The estimate for the upcoming release stands at 0.2%.
  4. BoC Rate Statement: Wednesday, 15:00. The BOC will be in the spotlight on Wednesday, as the central bank sets its first interest rate in 2015. The markets are expecting the rate to remain at 1.00%. The BOC will also release a Policy Report, followed by a press conference.
  5. Core CPI: Friday, 13:30. This is the primary gauge of consumer inflation and can have a strong effect on the movement of USD/CAD. The index slipped to -0.2% in November, shy of the forecast of +0.1%. The markets are expecting another decline for December, with an estimate of -0.3%.
  6. Core Retail Sales: Friday, 13:30. Core Retail Sales remains weak, with a small gain of 0.2% in November. This matched the forecast. The markets are expecting a strong improvement for December, with an estimate of 0.5%. if the indicator can match or beat the forecast, the Canadian dollar could get a much-needed boost.
  7. CPI: Friday, 13:30. CPI slipped to -0.4% in November, its first decline since July. Another weak reading is expected, with the December estimate standing at -0.5%.
  8. Retail Sales: Friday, 13:30. Retail Sales slipped to 0.0% in November, down from 0.8% a month earlier. However, this beat the estimate of -0.4%. Little change is expected in the upcoming release, as the estimate stands at 0.1%.

* All times are GMT

USD/CAD Technical Analysis

USD/CAD opened the week at 1.1862 and touched a low of 1.1799. The pair then sharply reversed directions and pushed above 1.20, hitting a high of 1.2046. USD/CAD then retracted, closing the week at the 1.1975 line (discussed last week).

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

Technical lines, from top to bottom:

We start with resistance at 1.2387. This line was an important cap, starting in May 2005.

1.2128 has remained intact as resistance since February 2009.

1.1975 was breached for the first time since November 2005 and has switched to a support level.

1.1872 is the next support line. It was a key resistance line in February 2007.

1.1743 has strengthened as the pair trades at higher levels. This is followed by 1.1640.

1.1487 is the final support level for now. It switched to support in mid-December.


I am bullish on USD/CAD

The Canadian dollar can’t find its footing, as it flirts with the key 1.20 line. US numbers were mediocre last week, and the loonie still lost ground. With market sentiment positive about the US recovery and the Fed likely to raise interest rates, the US dollar could continue to rally against the shaky Canadian currency.

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