USD/CAD Outlook Feb. 17-21

The Canadian dollar  posted modest  gains last week, as USD/CAD closed at 1.0974.  This week’s key events are Core CPI and Core Retail Sales. Here is an outlook on the major events and an updated technical analysis for USD/CAD.

Canadian Manufacturing Sales declined by 0.9% in January, an eight-month low. In the US, Unemployment Claims was above the estimate and retail sales numbers weakened in January.

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

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:  

1. Foreign Securities Purchases: Tuesday, 13:30. This indicator is directly linked to currency demand, as foreigners must purchase Canadian dollars to by domestic securities. The indicator posted sharp gains last month, coming in at $8.66 billion, well above the estimate of $7.21 billion. The markets expect the upward trend to continue, with the estimate standing at $9.97 billion.
2. Wholesale Sales: Wednesday, 13:30. Wholesale Sales dropped to just 0.0% last month, shy of the estimate of 0.3%. This marked a five-month low for the indicator. The markets are braced for a decline in January, with a forecast of -0.5%.
3. Core CPI: Friday, 13:30. Core CPI does not include the most volatile items which are found in the CPI release. The index has looked weak of late, posting two straight declines. The estimate for the January release stands at 0.1%.
4. Core Retail Sales: Friday, 13:30. Core Retail  Sales is the most important consumer spending indicator. Automobile sales, which makes up about 20% of retail sales, tends to be volatile and is excluded from Core Retail Sales. The index has posted gains of 0.4% in the past two releases, beating the market estimate each time. The forecast for the January release stands at a modest 0.2%.
5. CPI: Friday, 13:30. Weak inflation continues to hobble the Canadian economy, as CPI has not been in positive territory since last September. The markets are expecting a small gain of 0.1% for the January reading,  following  a decline in the previous release.  If the index contracts again, the loonie could lose ground.
6. Retail Sales: Friday, 13:30. The index gained a respectable 0.6% last month, beating the estimate of 0.3%. However, the markets are expecting a sharp downturn, with an estimate of -0.5%. Will the index again beat the prediction this month?

*All times are GMT.

 

USD/CAD Technical Analysis

USD/CAD opened the week at 1.1039 and quickly touched a high of 1.1090. The pair then pushed lower for the remainder of the week,  breaking below  the  1.10 line  and  dropping  to a  low of 1.0940,  briefly breaking through support at 1.0945 (discussed last week).  The pair closed the week at 1.0974.

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. This line  marked a high point for the pair in July 2009, at which time 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 is the next line of resistance. It has some breathing room as the Canadian dollar improved last week.

The key psychological barrier of 1.10 has switched to a support role. It is a weak line and could see activity early in the week.

1.0945  was  breached last week but remains in place. It  is currently a  weak support line.

1.0853 is the next support line. 1.0723 was a cap in mid-2010, before the US dollar tumbled and dropped all the way into 0.93 territory. It remains a strong support line.

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

The final support line for now is 1.0523.  It  was a peak back in November 2011 and has provided support since late November 2013.

 

I am bullish on USD/CAD

The Canadian dollar  has had a rough start in 2014, losing close to 400 points since the start of the year. Canadian numbers have not impressed, as the economy continues to underperform. If this week’s CPI and retail sales numbers  are not solid, the loonie could take a hit.

Further reading:

• 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.