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The Canadian dollar  enjoyed a quiet week until Friday, when USD/CAD  jumped 150 points. The pair closed at 1.1772, its highest level since May 2009. This week’s  highlights are  Building  Permits and  Employment Change. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

There were no Canadian releases last week, so US events took on added significance. Unemployment claims climbed higher  and the ISM Manufacturing PMI softened, but sentiment towards the US economy remains positive.

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

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

USDCADForecast Dec.29-Jan.2

  1. RMPI: Tuesday, 13:30. The Raw Materials Price Index measures inflation in the manufacturing sector. The index continues to point downwards, posting declines in six of the past seven readings. The October reading came in at -4.3%, well off the forecast of +1.5%. Another sharp decline is expected  for November, with an estimate of -4.6%.
  2. Trade Balance: Wednesday, 13:30. Trade Balance is carefully monitored by analysts, as the country’s trade balance is closely linked to currency demand. The indicator slipped to CAD 0.1 billion in October, shy of the estimate of CAD 0.4 billion. The markets are bracing for a decline in the upcoming release, with an estimate of -0.2 billion.
  3. Ivey PMI:  Wednesday, 15:00. This key event should be treated as a market-mover. The index was unexpectedly strong in November, improving to 56.9 points. This was well above the estimate of 52.7 points. The December reading is expected to be weaker, with the estimate standing at 52.3 points.
  4. NHPI: Thursday, 13:30. The New Housing Price Index provides a look at activity in the housing sector. The index has hovered at low readings, posting weak gains of 0.1% in the past two releases. The estimate for the upcoming release stands at 0.2%.
  5. Housing Starts: Friday, 13:15. Housing Starts have been near the 200 thousand level for much of the past six months. The indicator improved sharply in November, coming in at 196 thousand. However, this was shy of the forecast of 201 thousand. The markets are expecting a downturn in December, with the estimate standing at 191 thousand.
  6. Building Permits: Friday, 13:30. Building Permits tends to fluctuate, often leading to readings that are far off the estimates. The October reading weakened to 0.7%, well below the forecast of 2.1%. Little change is expected in the November reading, with an estimate of 0.8%.
  7. Employment Change: Friday, 13:30. This is one of the most important indicators and can have a significant effect on the movement of USD/CAD. The indicator was a major disappointment in November, posting a sharp decline of -10.7 thousand. The markets had expected a gain of 5.4 thousand. For December, the markets are expecting much better news, with a forecast of +10.3 thousand. Will the indicator meet or beat this rosy prediction? The Unemployment Rate is expected to remain steady at 6.6%.

* All times are GMT

USD/CAD Technical Analysis

USD/CAD opened the week at 1.1633 and touched a low of 1.1564. The pair then  sharply reversed directions  and climbed all the way to 1.1785,  pushing above resistance at 1.1752 (discussed last week). USD/CAD closed the week at 1.1772.

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

Technical lines, from top to bottom:

With USD/CAD posting sharp gains, we start at higher levels:

1.2128 has remained intact as resistance since February 2009.

1.1975 is  protecting the psychologically important level of 1.20. This line has held firm since November 2005.

1.1872 was a key resistance line in February 2007. It has remained intact since then.

1.1752 was breached late last week by the surging US dollar and finds itself in an unfamiliar role as support. It is a weak line and could see action early in the week.

1.1640 saw action last week and is currently providing strong support. 1.1487 remains a support line.

1.1340  is providing strong support. It has held firm since the first week of December.

1.1271 is  the final support level for now.

I  am neutral  on USD/CAD

USD/CAD spent the last two weeks close to the 1.16 line,  but the pair jumped right after  New  Year’s. Will the US dollar continue to rally next week?  The US economy continues to  outperform its  northern  neighbor, and the guessing game over a Fed interest hike will begin to heat up.  If this week’s key Canadian releases fail to impress, the loonie could resume this week’s sharp losses.

In this week’s podcast, we offer a preview for 2015:  the Fed hike, EZ QE, slippery oil, UK politics, Big in Japan, AUD down under, Loonie blues and Gold