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The Canadian dollar showed some strength during the week breaking below the 1.20 level for the first time since mid-January. However, the loonie failed to consolidate at these levels and posted very slight gains on the week. USD/CAD  closed the week at 1.2136.  This week’s major highlights are Building Permits and Employment Change.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

US numbers disappointed last week, as Consumer Confidence and Manufacturing PMI reports  fell short of  expectations. In Canada, GDP came in at a flat 0.0%, slightly better than expected.

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

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

USD_CAD_Forecast.May 4-8

  1. Trade Balance:  Tuesday, 12:30. Trade Balance is closely linked to currency demand, as foreigners must purchase Canadian dollars in order to purchase Canadian goods and services.
  2. BOC Senior Deputy Governor Carolyn Wilkins Speaks:  Tuesday, 16:45.  Wilkins will address an event in Montreal. Analysts will be looking for clues as to the BOC’s future monetary policy.
  3. Ivey PMI: Wednesday, 14:00. PMI reports are important gauges of the strength of the economy and should be treated as market-movers. The index has posted three straight readings below the 50-point line, pointing to contraction. The March reading slipped to 47.9 points, well short of the estimate of 51.1 points. The forecast for the April report stands at 50.1 points.
  4. Building Permits:  Thursday, 12:30.  Building Permits tends to show sharp fluctuation, leading to readings that are often well off the estimates. The February reading came in at -0.9%, compared to the estimate of 3.4%. This marks the third decline in four readings, as Building Permits has been struggling.
  5. Housing Starts:  Friday, 12:15.  Housing Starts provides a snapshot of the level of activity in the housing sector. The March reading rose to 190 thousand, marking a 4-month high. This easily beat the estimate of 175 thousand. Little change is expected in the April release.
  6. Employment Change:  Friday, 12:30.  Employment Change is one of the most important indicators, and an unexpected reading can have a dramatic effect on the movement of USD/CAD. The indicator surprised in March with an excellent reading of +28.7 thousand, crushing the estimate of -0.5 thousand. Will the indicator repeat with another strong reading? The unemployment rate remained steady in March, at 6.8%. This was slightly better than the estimate of 6.9%.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.2172 and touched a  low of  1.1949. The pair then  reversed directions and touched a high of 1.2205,  as resistance held firm at  1.2230 (discussed last week). USD/CAD then retracted and closed  the week at 1.2136.

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

Technical lines, from top to bottom

We  begin 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  held firm as the pair  pushed above the 1.22 line before retracting.

1.2114  is  providing weak support.  This line was tested during the week and could see further action early in the week.

1.1995 was also tested as the Canadian dollar gained ground before retracting.

1.1872 was a key resistance line in February 2007.

1.1731 is the final support line for now. It has held firm since early January.

I am neutral  on USD/CAD

The Canadian dollar remains at its highest levels since January, as the currency has benefited some weak US numbers in the past few weeks. In the US, Despite the likely postponement of a rate hike by the Fed, market sentiment remains positive over the US economy.

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Further reading: