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USD/CAD  lost about 100 points, closing the week  below the 1.20 level for the first time since mid-January.  The pair closed the week at 1.1992. This week’s major events are  Wholesale Sales,  Core  CPI and Core Retail  Sales.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The Canadian dollar took advantage of weak US retail sales last week.  Late in the week, US consumer sentiment  plunged, while Canadian Manufacturing Sales shot higher with a gain of 2.9%.

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

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

 

USD_CAD_Forecast.May 18-22.

  1. BOC Governor Stephen Poloz Speaks: Tuesday, 15:45. Poloz will speak at an event in Charlottetown. A speech that is more hawkish than expected is bullish for the Canadian dollar.
  2. Wholesale Sales: Wednesday, 12:30. This is the first key event of the week. The indicator has struggled,  posting 3 declines in the past 4  months. The February report showed a decline of -0.4%, well short of the estimate of +0.2%.  The markets are expecting a strong turnaround in the March release, with  an estimate of 0.3%.
  3. Core CPI: Friday, 12:30. Core CPI is the most important inflation indicator,  and an unexpected reading can have a significant impact on the direction of USD/CAD. The index has held steady at 0.6% for the past two readings. This beat the estimate of 0.3% in the March report. The markets are braced for a much lower gain in April, with an estimate of 0.1%.
  4. Core Retail Sales: Friday, 12:30. Core Retail Sales excludes automobile sales, which tend to be volatile and distorts the underlying trend. The indicator posted an excellent gain of 2.0% in February, easily beating the forecast of 0.7%. This reversed the trend of two straight declines. The estimate for the March estimate remains unchanged at 0.7%.
  5. CPI: Friday, 12:30. CPI slipped to 0.7% in March, within expectations. The downturn is expected to continue, with a forecast of 0.1%.
  6. Retail Sales: Friday, 12:30. Retail Sales rebounded in February with a strong gain of 1.7%, after two straight declines. This easily beat the estimate of 0.5%. The forecast is unchanged for the March reading, with an estimate of 0.5%.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.2090 and  climbed to a high  of 1.2144. The pair then reversed directions and  dropped to 1.1903.  The pair closed at 1.1992,  just below support at  1.1995 (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 1.2624.

1.2541 remains a strong resistance line. It has held firm since mid-April.

1.2387 is the next line of resistance.

1.2230 strengthened as the pair trades at lower levels.

1.2114 was tested early in the week as USD/CAD moved higher before retracting.

1.1995 is a weak support line and could see more action early in the week. It was tested as the Canadian dollar  posted strong gains.

1.1872 is the next support level.

1.1731 has held firm since early January.

The final support line for now  is 1.1615. This line marked the start of a rally by the US dollar at the start of the year.

 

I am bullish on USD/CAD

The US dollar lost ground last week against the loonie, but market sentiment remains positive about the US economy, with the Fed  expected to tighten rates later in the year. The US economy continues to outperform its northern neighbor, which bodes well for the US dollar.

In our latest podcast, we ask: USD: Glass half full or half empty? And also discuss other topics:

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