The Canadian dollar recorded strong gains for a second straight week, as USD/CAD dropped 110 points. The pair closed at 1.2860, its lowest weekly close since June 2016. This week’s key event is the BoC Rate Statement. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
Canadian employment data sparkled for a second straight week, as the economy added 45.3 thousand jobs, well above expectations. As well, the unemployment rate edged lower to 6.5%, down from 6.6%. In the US, the Federal Reserve minutes didn’t do much to raise investor confidence, unlike the upbeat rate statement in June. The minutes indicated that policymakers were divided over the timing of starting to reduce the Fed’s balance sheet, and members also expressed concerns about low inflation. US Nonfarm Payrolls rebounded in June, easily beating expectations.Updates:
- Jul 14, 16:32: USD/CAD forming a double bottom after the poor US data: Everything is going against USD/CAD. The big mover of the week came from Ottawa. The Bank of Canada not only...
- Jul 14, 14:30: US core inflation only +0.1%, retail sales fall 0.2% –: Core CPI y/y came out at 1.7% as expected but all the other data figures disappointed. Month over month, prices...
- Jul 13, 9:47: USD/CAD: What’s The Post-BoC Trade? – Nomura: The Bank of Canada raised rates and also pushed forecasts and expectations higher. USD/CAD tanked. Can the C$ continue higher?...
- Jul 12, 17:55: Where are the wage hikes? – MM #151: The latest US jobs report is out and the picture is becoming clearer: more job gains, no pay rise. We tackle...
- Jul 12, 17:39: USD/CAD at 13-month low on the BOC hike: The Bank of Canada raised rates and also let us know it’s not a one-off move. Dollar/CAD dropped from above...
- Jul 12, 16:00: BOC raises rates – Canadian dollar jumps – UDS/CAD down: The Bank of Canada met expectations and raised rates from 0.50% to 0.75%. In the accompanying statement, the Ottawa based...
- Jul 12, 14:31: Yellen’s worry on inflation triggers weaker USD/JPY: The prepared statement by Janet Yellen repeats many of the previous statements: another hike and the balance sheet reduction are...
- Jul 11, 8:33: BOC: To hike or not to hike?: On one hand, a rate hike in Canada is priced in. On the other hand, there is no 100% consensus...
- Jul 10, 18:04: Ahead of the BOC – what’s next for the C$?: The Canadian dollar looks strong ahead of the all-important meeting of the Bank of Canada. What’s next? Here are two...
USD/CAD daily graph with support and resistance lines on it. Click to enlarge:
- Housing Starts: Tuesday, 12:15. The indicator provides a snapshot of the strength of the housing sector. In June, the indicator dipped below the 200 thousand level, coming in at 195 thousand. This was short of the forecast of 205 thousand and marked a 6-month low.
- BoC Monetary Policy Report: Wednesday, 14:00. This quarterly release details the bank’s view of economic conditions and inflation, and can provide clues regarding future monetary policy. It will be followed by a BoC press conference.
- BoC Rate Statement: Wednesday, 14:00. The BoC is expected to raise rates a quarter-point to 0.75%. This would be the first rate hike since July 2015 and could boost the Canadian dollar.
- NHPI: Thursday, 12:30. The housing inflation index improved to 0.8% in May, its strongest gain since 2007. The estimate for June stands at 0.2%.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.2976 and quickly climbed to a high of 1.3014, testing resistance at 1.2980 (discussed last week). The pair recorded sharp losses at the end of the week, falling to 1.2859. The pair closed the week at 1.2860.
Live chart of USD/CAD:
Technical lines, from top to bottom
With USD/CAD posting sharp losses last week, we start at lower levels:
1.3212 has been a resistance line since late June.
1.3083 is protecting the symbolic 1.30 line.
1.2980 is an immediate resistance line.
1.2823 has provided support since September 2016.
1.2710 was an important cap in April 2015.
1.2457 is the final support line for now.
I am bearish on USD/CAD
The BoC is expected to raise rates, which could give the loonie a boost. In the US, there are growing doubts as to whether the Fed will raise rates one more time this year.
Our latest podcast is titled Markets are finally moving – will it last?