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The Canadian dollar enjoyed the rising prices of oil and the weakness of the US dollar to recover. GDP and the trade balance are the major events this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The Canadian dollar enjoyed the lower than expected GDP figure in the US. Last week, Canadian retail sales increased more than expected, rising by 0.8% to $39.5 billion in February, marking the second consecutive monthly rise. Meanwhile Core sales also surprised with a 0.7% gain in February from a gain of  0.4% in the preceding month.  However, in volume terms, retail sales were flat, suggesting Tuesday’s GDP may be weak.

Updates: Canada’s GDP rose 0.3%, beating the estimate of 0.2.%. This  gave a lift to the Canadian dollar, which has been improving against its US cousin. RMPI declined 1.7%. The estimate stood at  0.5%. IPPI  gained a modest 0.1%, matching the forecast. BOC Governor Mark Carney spoke in Edmonton. Trade Balance, a key event, will be released later on Thursday. USD/CAD was steady, trading at 1.0083.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:  USDCAD Technical Analysis Fundamental Outlook and Sentiment April 29 May 3 2013

  1. GDP: Tuesday, 13:30. Canada’s economy rebounded in January, expanding by 0.2% following a decline of the same amount in December.  The main rise occurred in manufacturing, mining and the oil and gas. Based on this reading, Canada’s economy is expected to grow at roughly a 1.5% annualized pace in the first quarter. However, this is still below the BOC’s 2.0% target rate. The expansion rate of 0.2% is predicted this time.
  2. RMPI: Tuesday, 13:30. Canadian industrial product prices increased 1.4% in February, the biggest climb since June 2008, amid a rise of prices for petroleum,  coal  and other  commodities. Meantime, Raw materials prices edged up 2.2%, mainly due to crude oil. Analysts expected a 0.4% climb in industrial product prices and a 2% gain in raw materials prices. RMPI  is expected to gain 0.1% , while IPPI is predicted to be flat.
  3.  Mark Carney speaks: Wednesday, 22:50 and Friday, 18:05. Mark Carny the next governor of the BOE will speak at the University of Alberta, in Edmonton and at the Cardus Convivium Project, in Toronto. His words may cause volatility in the market.
  4. Trade Balance: Thursday, 13:30. The seasonally adjusted trade balance increased its deficit to C$1.02 billion in February following a significantly upwardly revised C$0.75 billion deficit registered in January.  The increase in deficit was mainly due to a 0.65 decline in exports. The two first months readings suggest the likelihood of another disappointing quarter for GDP growth. A smaller deficit of C$0.7 billion is expected.

* All times are GMT

USD/CAD Technical Analysis

Dollar/CAD started the week by trading above the 1.0250 line mentioned last week. It then made a clear and elegant break, holding on to 1.0180 at first, and then falling lower.

[do action=”tradingviews” pair=”USDCAD” interval=”60″/]

Technical lines, from top to bottom:

1.0523 was a peak back in November 2011 and is minor resistance. 1.0446 was the peak that the pair recorded in June 2012 and is a key line on the upside.

1.0340 was the peak during March 2013 and its position strengthens at the moment. Consequent rises failed to reach this line, and this could be a bearish sign. 1.0285 replaces the round 1.03 line – the pair found resistance at this line during April 2013.

1.0250 was a peak before the pair moved below parity a long time ago, and worked as support quite well in March 2013. It is stronger once again. 1.0180 provided support for the pair during March, and late switched to resistance. It is now a pivotal line.

1.0125 gave its support to the pair during April 2013 and remains important despite the temporary break.  1.01, was a trough back in July, and switched to resistance afterwards. The line proved its strength several times in 2013.

1.0066 was key support before parity. It’s strength during July 2012 was clearly seen and it gave a fight before surrendering. It has a stronger role after capping the pair during November 2012, but has begun weakening.  The very round number of USD/CAD parity is a clear line of course, and the battle was very clear to see at the beginning of August 2012 and also in 2013. It is a clear separator.

0.9950 provided some support for the pair during November and worked as resistance earlier.  0.9910 remains the chart after serving as a bottom border for the pair in November 2012. It already managed to work as weak resistance in December 2012.

0.9880 showed that it is a clear separator in October 2012. It also had a role in the past. This line switches roles once again.

I am neutral on USD/CAD

With the recent rise in the  price of oil, the loonie has some support. Also the lower than expected figures in the US helped the C$, but this may backfire. Canada needs a strong US, as it is not that strong on its own. We could see some stability before the pair resumes its rises.

 Further reading: