The Canadian dollar was in free-fall last week, falling a remarkable 450 points. USD/CAD closed the week at 1.2411, its highest level since April 2009. This week’s sole release is GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The loonie tumbled after the Bank of Canada unexpectedly cut rates to 0.75%. Manufacturing and CPI numbers were weak, but retail sales beat the estimate. In the US, In the US, Unemployment Claims disappointed and Existing Home Sales missed expectations.
[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- GDP: Friday, 13:30. GDP is one of the most important indicators and should be treated by traders as a market-mover. Canadian GDP is released every month, unlike most other industrialized countries, which publish GDP each quarter. The November reading posted a gain of 0.3%, better than the forecast of 0.1%. However, the markets are expecting a decline of 0.1% for December. If the indicator fails to post a gain, we could see the wobbly Canadian dollar fall even lower.
* All times are GMT
USD/CAD Technical Analysis
USD/CAD opened the week at 1.1971 and quickly touched a low of 1.1935. The pair then sharply reversed directions and pushed above the 1.24 line, hitting a high of 1.2457. USD/CAD closed the week at the 1.2411, breaking past resistance at 1.2387 (discussed last week).
Technical lines, from top to bottom:
With the Canadian dollar recording huge losses, we start at higher levels:
1.2711 has been a cap since June 2005.
1.2541 is the next resistance line.
1.2387 was an important cap back in May 2005. It is a weak support level and could see action early in the week.
1.2128 had been a resistance line since February 2009, but has switched to a support role following the sharp gains by USD/CAD.
1.1975 is the final support line for now. It had been protecting the symbolic 1.20 level until last week but has also switched to a support role.
I am bullish on USD/CAD
The Canadian dollar took a licking last week, and with the currency markets showing strong volatility, could continue to lose ground, especially if GBP contracts. We’ll hear from the Fed next week, and any hints about the timing of an interest rate hike could result in broad gains for the US dollar.
In our latest podcast, we do an ECB QE rundown, SNBomb effect on brokers, surprise cut in Canada & Iranian oil:
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.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the kiwi, see the NZDUSD forecast.
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