USD/CAD rose for another week, and is now within reach of parity. As 2013 enters, important indicators are released. Employment data is the major event this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The Canadian dollar continues moving according to events in the US. This time, the rising uncertainty about the fiscal cliff weighed on the loonie and sent it lower. Canada needs a growing US, not a recessionary one.
Updates: The markets are back in action following the New Year’s Day break, but there are no Canadian releases until Friday. The loonie jumped on the currency bandwagon, as the US dollar is broadly weaker following the fiscal cliff agreement. USD/CAD was done about 100 pips on Wednesday, as the pair is trading at 0.9845. There are a host of Canadian releases on Friday. Highlights include the Unemployment Rate and Employment Change. USD/CAD has edged higher, and was trading at 0.9863.
- Employment data: Friday 13:30. The Canadian economy added 59,300 jobs in November five times more than forecasted. As a result, unemployment rate dropped to 7.2% from 7.4% in October. This strong rise came following an unsettling increase of a mere 1,800 jobs in the previous month. Full-time employment climbed 55,200 in November while part- time positions increased 4,100indicating Canadian job market remains strong. Employment Change is expected to remain the same while unemployment rate is forecasted to reach 7.3%.
- RMPI: Friday 13:30. Canada’s producer price index declined 0.1% in October, amid lower prices for petroleum and coal products. This unexpected drop followed a 0.5% gain in the previous month. Meanwhile Raw material prices were unchanged in November while expected to shrink by 0.4% and following a 1.3% climb in October. On a yearly base, industrial product prices fell by 0.2. RMPI is forecasted to drop 0.9%, while IPPI is expected to decline by 0.1%.
* All times are GMT.
USD/CAD Technical Analysis
Dollar/CAD traded in a limited range between the 0.9910 and 0.9950 lines (mentioned last week). Towards the end of the week, it made a breakout and closed at 0.9967.
Technical lines, from top to bottom:
1.02 was the trough of 2009 and remains important since then, working in both directions. Another round number, 1.01, was a trough back in July, and switched to resistance afterwards.
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.
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. 0.9950 provided some support for the pair during November and worked as resistance earlier. Its stubborn behavior as resistance in December proved its strength. This line is close once again.
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.
0.9817 was a stubborn peak in September and is now significant support. As seen in December 2012, this line worked as a cushion. Lower, 0.9725 worked as strong support back at the fall of 2011 and showed its strength once again in October 2012.
0.9667, which was another strong cushion in June 2011 is the next line. The round number of 0.96 provided some support back in 2011 and is minor now.
Further below, 0.9406 is the post crisis low.
I am bearish on USD/CAD.
Politicians in the US could reach an agreement on the fiscal cliff: even a temporary agreement could send the pair away from parity. Later in the week, the pair depends on strength from employment figures in both countries. It’s important to remember that a strong US NFP will boost the loonie.
Another technical view: USD/CAD Tentative Breakdown Below Support
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar.