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The Canadian dollar  dropped below the 1.09 last week for the first time since January.  However,  it  was unable to hold onto these gains and closed the week almost unchanged, at 1.0968. This week’s highlights include Manufacturing Sales, the Overnight Rate and Core CPI.   Here is an outlook on the major events and an updated technical analysis for USD/CAD.

In the US, Unemployment Claims looked sharp and UoM Consumer Sentiment beat the estimate. Canadian Building Permits sustained a steep slide, but the Canadian dollar managed to hold its own last week.

[do action=”autoupdate” tag=”USDCADUpdate”/]USD/CAD daily chart with support and resistance lines on it.

Click to enlarge:   USDCAD Outlook Apr14-18

  1. Manufacturing Sales: Tuesday, 12:30. This is the first major event of the week. The indicator bounced back nicely in February, climbing 1.5%. This was its sharpest gain since August and easily beat the estimate of 1.1%. The forecast for March remains at 1.1%, and the markets will be hoping for another solid performance.
  2. Foreign Securities Purchases: Wednesday, 12:30. This indicator is closely linked to currency demand, as foreigners wishing to purchase Canadian securities must purchase Canadian dollars to do so. The indicator posted a gain of $1.09 billion last month, well short of the estimate of $3.24 billion. The markets  are expecting a strong improvement in the March reading, with an estimate of $4.57 billion.
  3. BOC Monetary Policy Report: Wednesday, 14:00. This report is released every quarter. It provides details about economic conditions, and analysts will be combing through the report, looking for hints as to the BOC’s future monetary policy.
  4. Overnight Rate: Wednesday, 14:00. The BOC will announce the benchmark interest rate for March in a rate statement. The rate has been pegged at an even 1.0% since September 2010, and no change is expected in the upcoming announcement. A press conference will follow, hosted by BOC Governor Stephen Poloz.
  5. Core CPI: Thursday, 12:30. Core CPI is considered a better gauge of consumer inflation than CPI, as the former excludes the 8 most volatile items, which can distort the underlying trend. The key index rose 0.7% in February, its sharpest gain in a year. The estimate for the March release stands at 0.3%. If the index fails to meet expectations, we could see the Canadian dollar lose ground.
  6. CPI: Thursday, 12:30. Like Core CPI, the index had a strong February, with a gain of 0.8%, beating the estimate of 0.6%. The markets are expecting a weaker reading in March, with the estimate standing at 0.4%.

*All times are GMT.

 

USD/CAD Technical Analysis

USD/CAD  opened the week at 1.0986 and quickly touched a high of 1.1009. The pair then reversed directions,  dropping below the 1.09 level,  dipping to a low of 1.0858, as support at 1.0853  (discussed last week) remained firm.  USD/CAD  closed the week at 1.0968.

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

Technical lines, from top to bottom:

We begin with resistance at 1.1617, which  marked a high point for the pair in July 2009, when  the Canadian dollar posted  a rally in which USD/CAD dipped below the 0.94 line.

1.1535 provided key support back in early 2007. It has been a resistance line since July 2009.

1.1369 fell in October 2008 as the US dollar posted  sharp gains, climbing as high as the 1.21 level.

1.1124  has strengthened as a  resistance line as the Canadian dollar continues to improve.

The key psychological barrier of 1.10  was briefly breached again last week,  but remains in place as a  resistance role. It is a weak line and could see more action early this week.

1.0945  is the first line of support for the pair. It was breached as the Canadian dollar showed some strength but remains in place as we start the new week. Will the loonie break through this weak line?

1.0853 is the next support line. It held firm as USD/CAD dropped sharply before bouncing higher. It is providing strong support.

1.0723 was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory.

1.0660 saw a lot of activity in the second half of December and continues to provide strong support.

1.0519 is the final support level for now. It has been a strong support line since late November.

I am  neutral on USD/CAD

The Canadian dollar has been flexing some muscle, and briefly broke below the 1.09 level last week. Manufacturing Sales and Core CPI are this week’s market-movers, and strong numbers could give the loonie a lift. South of the border, employment numbers have been steady and another QE trim is likely at the end of the month, which is bullish for the US dollar.

Further reading: