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The  Canadian dollar  kept its balance against the greenback. How will Mid-east tensions move the pair?  Leading Index and Foreign Securities Purchases are the major events this week. Here’s an  outlook  for the Canadian events and an updated technical analysis for the Canadian dollar.

Last week the Bank of Canada members left the interest rate unchanged at 1% confident in the current market situation but worried about possible downside risks from the European continent. Ivey PMI jumped in October to 59.9 after dropping to54.4 in September indicating improvement in the Canadian economy. WillCanada be able to avoid the harsh impact of the European debt crisis?

Updates: Trouble in the euro-zone helps the greenback and USD/CAD is challenging the 1.0263 line once again. The pair couldn’t hold on to the 1.0263 line. The relief from Europe (especially from Spain), put the place at a lower spot. Canada’s southern neighbor, the US, has a rate decision, but Bernanke isn’t predicted to make changes. No QE means lower commodity prices and a weaker Canadian dollar. Bernanke’s move sent USD/CAD above resistance at 1.03. 1.0360 caps the pair that is now in the 1.03-1.0360 range, following more bad news from Italy. The Canadian dollar retreated with other commodity currencies on the drop in Europe. USD/CAD reached 1.0420. The good US figures and a good Spanish auction helped the pair drop back to the 1.03 – 1.0360 range.

USD/CAD  daily chart with support and resistance lines on it. Click to enlarge:USD/CAD Chart December 12 16 2011

  1. Mark Carney speaks: Monday, 18:10. Mark Carney BOC Governor is scheduled to speak isToronto. His announcements can rock the market and provide information regarding future monetary policy.
  2. OPEC Meetings Wednesday. According to hints made by the Iraqi Oil Minister, Abdul-Kareem Luaibi, the Organization of Petroleum Exporting Countries (OPEC) is expected to cut oil output at its December 14 meeting inVienna,Austria. However contradicting rumors from industry observers claim that most Gulf Arab OPEC members will oppose to this cut since oil prices are well above $100 a barrel.
  3. Leading Index: Wednesday, 13:30. The composite leading index increased by 0.2% in October in line with predictions following 0.1% increase in the previous month. Five of 10 components increased, while four dropped indicating a positive growth trend. An increase of 0.3% is expected.
  4. Manufacturing Sales: Wednesday, 13:30. Manufacturing sales edged up 2.6% in September following 1.4% rise in August beating expectations for 1.1% gain. These increases result in an annualized growth rate of 15.2% in the third quarter after 10.3% drop in the second quarter. A further rise of 2.85 is forecasted now.
  5.  Capacity Utilization Rate: Thursday, 13:30. Canadian second quarter industrial capacity utilization rate dropped to 78.4 after the Tsunami inJapan after78.9 in the first quarter below the 79 predicted. An increase to 78.9 is expected.
  6.  Foreign Securities Purchases: Friday, 13:30. Foreign investors kept buying Canadian securities in September, but at a slower pace than the previous month. Non-residents bought $7.4 billion securities following $8.22 billion in August below the $9.24 billion predicted. A rise to $8.23 billion is expected.

* All times are GMT.

USD/CAD  Technical  Analysis

At the beginning of the week, Dollar/CAD traded in a narrow range and was capped by the 1.02 line (mentioned last week). It then dropped and bottomed out at 1.0050 before  surging  again to the 1.0263 line before closing at 1.0167.

Technical lines, from top to bottom:

1.0677 is a strong resistance line that accompanies the pair for a long time. It worked well during October and also in the past, and remains of high importance.  1.0550 is a minor line on the way up – a line which can slow the pair.

1.0500 is another minor line of resistance. It was a  pivotal around the same time and was a  point  of resistance before the pair fell. 1.0430 provided support when the pair was trading at higher ground during November.

1.0360 capped the pair in September and October and also provided support. The round number of 1.03 was the peak of a move upwards seen in November and is weaker now.

1.0263 is the peak of recent surges during October, November and December, and has a stronger role after capping an attempt to rise. The round figure of 1.02 was a cushion when the pair dropped in November, and also the 2009 trough. This is a pivotal line once again.

1.0143 was a swing low in September and worked as resistance in the past. It capped a small recovery attempt in November.  1.0050 worked as support in November, was a swing low in December and had the opposite role back in 2010. It worked as a great cushion for the pair in November.

The very round number of USD/CAD parity is a clear line of course, and it will be closely watched on a potential downfall.  Under parity,  the round number of 0.99 provided support on a fall during October and also served as resistance back in June.

0.9830 provided support for the pair during September.  0.9780, where the current run began is the next and important support line.

I remain neutral on USD/CAD.

On the domestic level, Ivey PMI provides hope but the  disappointing job report  balances it. Canada’s biggest neighbor and important trade partner, the US,  continues showing positive signs, but Europe is still unable to resolve the crisis, and this counters the US optimism. Oil prices, which remain high, push the loonie higher, but if these climb on an eruption of violence around Iran, global fear could drive funds to the safety of the US dollar. So all in all, the picture is mixed.

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