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USD/CAD  reversed directions last week, posting modest losses in subdued holiday trading. The pair closed the week at 1.0631. There are a host of key events this week, including Building Permits and Employment Change.

US Unemployment Claims looked strong and Fed Reserve chair Bernard Bernanke stated that the US economy continues to grow. There were no Canadian releases, but the loonie managed to start off 2014 with modest gains against its big cousin.

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

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Forecast Jan. 6-10

  1. RMPI:  Monday, 13:30. The Raw Materials Price Index measures inflation in the manufacturing sector. The index has posted two straight declines, dropping 2.3% last month. The downward trend is expected to continue, with the December estimate standing at -1.1%.
  2. Trade Balance:  Tuesday, 13:30.  This is the first key event of the week. Canada surprised with a trade surplus in November of 0.1 billion dollars, as the estimate stood at -0.7 billion. The forecast for December calls for a decline of -0.2   billion.
  3. Ivey PMI: Tuesday, 15:00. This key index took a dive in November, dropping t o53.7 points, compared to 62.8 points the month before. This was well short of the estimate of 59.0 points. The markets are expecting a slight improvement, with an estimate of 55.0 points.
  4. Housing Starts: Thursday, 13:15. Housing Starts remain strong, but dropped in November to 192 thousand, down from 192 thousand a month earlier. The markets are expecting some improvement for December, with an estimate of 196 thousand.
  5. Building Permits: Thursday, 13:30. Building Permits tends to show strong movement, often leading to estimates that are well of the mark. This trend continued in November, when the indicator jumped 7.4%, way above the estimate of 1.2%. The markets are expecting a downturn in the upcoming release, with an estimate of -2.3%.
  6. NHPI: Thursday, 13:30. The New Housing Price Index is an important gauge of activity in the housing sector. The index has been posting very small gains, with the November reading coming in at just 0.1%. Little changed is expected in the upcoming release.
  7. Employment Change: Friday, 13:30. This is one of the most important indicators and can have a major effect on the movement of USD/CAD. The strong November release surprised the markets, as the reading of 21.6 thousand was much higher than the estimate of 12.3 thousand. The markets are expecting a weaker reading for December, with an estimate of 13.3 thousand. The Unemployment Rate is expected to remain at 6.9%, where it has hovered since September.

 

USD/CAD Technical Analysis

USD/CAD opened the week at 1.0707 and  touched a  high of 1.0727, breaking above resistance at 1.0723 (discussed last week). The pair then reversed directions,  and  dropped below the 1.06 line,  touching a low of 1.0588. USD/CAD closed the week at 1.0631.

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

 

Technical lines, from top to bottom:

We  begin with resistance at 1.1219. This line has remained intact since  July 2009, when the Canadian dollar showed sharp volatility, trading as high as the 1.17 level. This is followed by resistance at 1.1124.

The next resistance line is 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. The pair was able to break through this barrier last week, but only briefly before retracting.

1.0660 continues to be busy. This line started the week as weak support but has reverted to a resistance line. It is not a strong line and could see further activity early in the week.

1.0523 was a peak back in November 2011. This line has some breathing room as the USD/CAD begins the week above the 1.06 line.

1.0446 has held since mid-November, when the US dollar continued a rally which saw it break above the 1.07 line.

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 final support line is  at 1.01. It 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.

 

I am  bullish on USD/CAD

The Canadian dollar managed to hold its own over the holidays, but with the markets getting back into full gear, we could see the Canadian dollar lose ground. The Federal Reserve finally pulled the QE trigger, and with further tapers expected  early in 2014, we could see the US dollar  gain ground.

Further reading: