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The Canadian dollar  continues to lose ground, as the pair tested the 1.12 line late in the week, before closing the week with slight losses at 1.1124.  There a host of key events this week, highlighted by Employment Change. Here is an outlook on the major events and an updated technical analysis for USD/CAD.

In the US, Unemployment Claims and Pending House Sales were weak, but Advance GDP showed a strong gain. Canadian GDP, the only Canadian release, posted a weak gain of 0.2%.

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

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:     USDCAD Forecast Feb. 3-7

  1. RMPI: Monday, 13:30. This manufacturing indicator continues to post declines, and sagged by 4.1% last month. The markets are expecting a turnaround in January, with an estimate of 2.1%. Will the index follow suit with a strong reading?
  2. Building Permits: Wednesday, 13:30. This key indicator shows sharp movement, resulting in estimates which are often off the mark. The indicator looked awful in December, posting a decline of 6.7%. The estimate for the January releases stands at 2.3%.
  3. Trade Balance: Thursday, 13:30. The December release was weaker than expected, with a reading of -$0.9 billion, well above the estimate of $-0.2 billion. The markets are anticipating much better news in January, with the estimate standing at $1.0 billion.
  4. Ivey PMI:  Thursday, 15:00. This PMI has dropped sharply in the past few months, and came in at 46.3 points in December, pointing to contraction. The estimate for the upcoming reading is back above the 50-point line, at 51.3 points.
  5. Employment Change: Friday, 13:30. This key employment event looked awful last month, posting a drop of -45.9 thousand. This was nowhere near the estimate of +14.4 thousand. Will the indicator bounce back in January? The Unemployment Rate will also be released. The rate jumped to 6.9% last month, well above the estimate of 6.9%.
  6. BOC Senior Deputy Governor Tiff Macklem Speaks: Friday, 20:25. Macklem will speak at a university in Montreal. Analysts will be looking for some clues as to the BOC’s future monetary policy.

*All times are GMT.

 

USD/CAD Technical Analysis

USD/CAD opened the week at 1.1062 and quickly touched  a low of 1.1032. The pair then reversed directions,  barreling past the  1.12 line and climbing  to a  high  of 1.1224. The pair could not consolidate at these levels and closed the week at 1.1124.

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

 

Technical lines, from top to bottom:

We start 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 was breached  again this week  and the pair ended the week right on at this level.  This line could have a  busy week.

The key psychological barrier of 1.10 began the week in  the unfamiliar  role of support for the pair and held firm as the pair posted slight losses early in the week.

1.0945 has strengthened in support as USD/CAD trades at higher levels.

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.

 

I am bullish on USD/CAD

The Canadian dollar  remains under strong pressure  and tested the 1.12 line last week. With the Federal Reserve  adding another dose of QE last week, the greenback could move higher. If Canadian key numbers don’t impress this week, look for the loonie to head southward.

Further reading: