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The Canadian dollar  had a busy week, and posted gains of 100 points. USD/CAD  closed  the week at 1.3163. This week’s key events are Trade Balance and Employment Change.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

USD/CAD posted strong volatility on Wednesday, with the Canadian dollar moving higher  prior to  the Federal Reserve announcement  but dropped sharply afterwards after the surprise hawkish statement from the Fed. The Canadian dollar posted gains on Friday, as Canadian GDP met expectations in the August report, with a gain of 0.1%. In the US, workers wages were up sharply in Q3, as the Employment Cost Index posted a gain of 0.6%. UoM Consumer Sentiment improved to 90 points, within expectations.

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

USD/CAD daily chart with support and resistance lines on it.

USD_CAD_Forecast.Nov2-6

 

 

  1. RBC Manufacturing PMI:  Monday, 14:30. Manufacturing PMI hasn’t had a reading above 51.3 in 2015, and the previous release of 48.6 points was the worst one this year. Keeping in mind that the 50-point level separates contraction from expansion, this points to weakness in the manufacturing sector. Will the indicator improve in the October report?
  2. Trade Balance:  Wednesday, 13:30. This is the first key event of the week. The trade deficit ballooned to C$2.5 billion in September, well above the estimate of C$1.1 billion. This also marked a 3-month high for the trade deficit.
  3. Ivey PMI:  Thursday, 15:00. The index slipped badly in August, coming in at 53.7 points, compared to 58.0 points a month earlier. This also fell short of the estimate of 54.1 points. Will the indicator rebound in the September report?
  4. Employment Change: Friday, 13:30. Employment Change is one of the most important indicators, and an unexpected reading can have a sharp impact on the movement of USD/CAD. The indicator has now beaten the forecast for three straight months, with the August reading of 12.1 thousand beating the estimate of 10.5 thousand. The unemployment rate rose to 7.1% in August, surprising the markets which had expected a rate of 6.9%. This marked the highest rate since June 2014.
  5. Building Permits: Friday, 13:30. Building Permits tends to show strong fluctuation, making accurate forecasts a tricky task. The indicator posted a decline of 3.7% in August, well off the estimate of a 0.5% gain. Will the indicator improve in the September reading?

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.3172 and  climbed to a high of 1.3279. The pair then reversed directions,  dropping  to a low of  1.3042,  testing support at 1.3063  (discussed last week).  USD/CAD closed the week at 1.3078.

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

Technical lines, from top to bottom

1.3443 has held firm since late September.

1.3353 is the next resistance line.

1.3213 remains busy and was tested again this week as the pair posted strong gains before retracting.

1.3165 was easily broken and has switched to a support role.

1.3063 was tested and is currently a weak support line. It could see further action during the week.

The very round line of 1.2900 is  the next line of support.

1.2798 has held firm since July.

1.2648 was an important cap in May and June. It is the final support line for now.

I am  bullish on USD/CAD

With a Fed rate hike in 2015 back on the table,  the  US dollar may look more attractive to investors  and could make gains against its rivals. The Canadian  economy is lagging  behind the US,  so the Canadian dollar will  likely have trouble  holding its ground against the  greenback.

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