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The Canadian dollar returned to its losing ways last week, as USD/CAD  gained about 100 points, closing at 1.1275.  This week’s highlights are Core Retail Sales and the Overnight Rate.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The US dollar shrugged off  weakness in US retail sales and a poor PPI reading. US employment numbers continue to looks strong,with the best jobless claims in over a decade.  In Canada,  a sharp  decline in Manufacturing Sales weighed on the  Canadian  currency.

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

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

USDCADForecast Oct20-24

  1. Wholesale Sales: Monday, 12:30. This is the first key event of the week. The indicator  came in at  -0.3% last month, well off the estimate of a gain of 0.8%  and a  4-month low. The markets are expecting a turnaround in the September reading, with the estimate standing at 0.2%.
  2. Core Retail Sales: Wednesday, 12:30. Core Retail Sales  is one of the most important economic indicators and  can have a significant effect on the movement of USD/CAD. It excludes volatile items which make up Retail Sales. Last month, the indicator came in at -0.6%, its first decline since January. This missed expectations of -0.1%. Better news is expected in the upcoming release, with a forecast of 0.3%.
  3. Retail Sales: Wednesday, 12:30. Retail Sales is the primary gauge of consumer spending. The indicator declined 0.1% in the previous release, well short of the estimate of 0.4%. This marked the first decline since April. The estimate for the September release stands at 0.2%.
  4. BOC Monetary Policy Report: Wednesday, 14:00. This   report is released each quarter. It provides details of the BOC’s view of economic conditions, and analysts will be looking for hints as to the central bank’s future monetary policy. A press  conference will follow.
  5. Overnight Rate: Wednesday, 14:00. The BOC will set  its new  benchmark interest rate and issue a rate statement. The rate has been pegged at 1.0% for the past four years and no change is expected at present.

* All times are GMT.

USD/CAD Technical Analysis

USD/CAD opened the week at 1.1187 and quickly  touched a low of 1.1177.  The  pair jumped to a high of 1.1386  before retracting. USD/CAD closed the week at 1.1275, just shy of resistance at 1.1278 (discussed last week).

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

Technical lines, from top to bottom:

We begin with resistance at 1.1877, which was last tested in February 2007.

1.1640 marked the start of a US dollar rally in July 2009,  which saw  the pair drop close to the 0.94 line.

1.1494 was a key resistance line in November 2006.

1.1369 was breached in October 2008 as the US dollar posted  sharp gains, climbing as high as the 1.21 level. This line has remained steady since July 2009.

1.1271 was breached but recovered by the end of the week, with the pair closing just below this line. It could see some action early in this week.

1.1122 is the first support level. It has strengthened as the pair trades at higher levels.

1.1054  remains a strong support line. 1.0944  is next.

1.0815 has held firm since late August.

1.0737  marked a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory. It is the final support line for now.

I  remain  bullish  on USD/CAD

 US data continues look strong, led by solid  employment data, as the US economy continues to outperform its  northern neighbor.  As well,  the  Fed is likely to  wind up QE later  in the month, while  Canadian monetary policy  is expected to remain unchanged.

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Further reading: