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The Canadian dollar improved last week, as USD/CAD  lost close to one cent. The pair closed the week at 1.0655.  Highlights for the upcoming week include Manufacturing Production, Core CPI and Core Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

Solid retail sales out of the US  boosted the greenback, but the loonie was able to recover on Friday following weak US inflation numbers.

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

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD_CAD Dec 16-20_technical

 

  1. Foreign Securities Purchases: Monday, 13:30. Foreign Securities Purchases is closely linked to currency demand, as foreigners must purchase Canadian dollars in order to buy Canadian securities. The indicator jumped in October to 8.36 billion dollars,  its highest level since May.  The  markets are  expecting  the upward trend to continue, with  the estimate standing at 9.24 billion.
  2. Manufacturing Sales: Tuesday, 13:30. This is the first key event of the week.  The indicator  posted a  small decline in September but bounced back up in October with a gain of 0.6%. This edged above the estimate of 0.5%. The markets are braced for a downturn for November, with an estimate of -0.2%. Will the indicator beat this prediction?
  3. Wholesale Sales: Wednesday, 13:30. Wholesale Sales is an important indicator of   consumer spending. The indicator came in at 0.2%  last month, short of the estimate of 0.4%. The upcoming forecast remains at 0.4%.
  4. Core CPI: Friday, 13:30. This key index is considered more reliable than CPI, as it excludes the 8 most volatile items. The index has been very steady, with three straight gains of 0.2%. The November estimate stands at 0.1%.
  5. CPI: Friday, 13:30. CPI has looked sluggish, and posted a decline of 0.2% last month. This missed the estimate of 0.2%. The forecast remains unchanged at 0.2%.
  6. Core Retail Sales: Friday, 13:30. This indicator is  considered the  most important gauges of consumer spending. Core Retail Sales excludes automobile sales, which tend to be volatile and distort the release. The indicator has been weakening in recent readings, and posted an unimpressive figure of 0.0% in October, shy of the estimate of 0.2%. The estimate remains at 0.0% for the upcoming release.
  7. Retail Sales: Friday, 13:30. Retail Sales posted a strong gain of 1.0%, a four-month high. This easily beat the estimate of 0.3%. The markets are anticipating another gain of 0.3% for the upcoming release.

* All times are GMT.

 

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0655 and  touched a high of 1.0670. The pair then reversed directions,  falling  to a low  of 1.0561, as  support at 1.0523 (discussed last week) remained intact. The pair closed the week at 1.0571.

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

 

Technical lines, from top to bottom:

We  start with resistance at 1.1124. This line has remained intact since  July 2009, when the Canadian dollar showed sharp volatility, trading as high as the 1.17 level.

1.0945, which is protecting the key 1.10 level. This line has not been tested since September 2009.

Next is resistance at 1.0853. This line has held firm since May 2010.

1.0723 was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory. With the Canadian dollar losing ground of late, this line was under pressure last week but held firm.

1.0660 has been busy and was breached for the second straight week, but remains intact as a strong resistance line.

1.0523 was a peak back in November 2011. This line held firm as USD/CAD lost ground late in the  week.

1.0446 continues to provide support. This line has some breathing room as the USD/CAD trades at higher levels.

1.0340 had a busy October and is providing strong support. 1.0250 is next. This line has held firm since mid-September.

1.0180 provided support for the pair during March, and saw a lot of activity in the first half of June. It remains a strong support line.

The round number of 1.01 was a trough back in July 2012 and switched to resistance afterwards. The line proved its strength several times in 2013, most recently in mid-May.

Our final  support level for now is the round number of parity. This  is a clear line  which has  not been tested since mid-February.

 

I am  bullish on USD/CAD

The Canadian dollar showed some improvement last week, but speculation that the Fed could taper QE this week  is likely to result in investors staying clear of the loonie in favor of the safe-haven US dollar.

Further reading: