The Canadian dollar enjoyed the greenback’s weakness and made some gains. Nevertheless, support was eventually left intact. Will USD/CAD break lower now? BOC Business Outlook Survey is the major event this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The US dollar retreated across the board, also thanks to optimism from Europe. In Canada, purchasing activity rose above the 50 point line in December, reaching 52.8 following 47.5 in November. The reading was higher than the 49.5 predicted by analysts. However economists were not too happy with the result since Ivey’s employment data went below 50 for the first time in seven months.
Updates: There are only three Canadian releases this week. The Bank of Canada released its Business Outlook Survey on Monday. The quarterly report found that Canadian businesses expect to see an improved business climate in 2013, enabling them to hire more employees. However, optimism remains weak, as uncertainty about the direction of the Canadian economy is weighing on the business sector. The US dollar has edged higher against the loonie, as USD/CAD was trading at 0.9861.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- BOC Business Outlook Survey: Monday, 15:30. The BOC Business survey revealed Canadian business executives were moderately optimistic about their outlook for 2013, but were cautious about near-term investments. They also see small change in the pace of sales in 2013. Foreign demand for Canadian commodities is expected to continue together with a modest rise in domestic demand.
- Foreign Securities Purchases: Thursday, 13:30. Foreigners maintained their purchases of Canadian securities, registering a net C$13.26 billion ($13.39 billion) in October following C$14.12 billion in September. The steady pace of purchases indicates Canadian economy is considered strong and resilient to global slowdown. A smaller sum of C$ 9.45 billion is expected now.
- Manufacturing Sales: Friday, 13:30. Manufacturing sales dropped unexpectedly in October, down 1.4% from a flat reading in September. This was the biggest decline in nine months amid a slowdown in motor vehicles and primary metals closely connected to fiscal crises in both the U.S. and Europe. Analysts believe the second half of 2013 will to be more prosperous for manufacturers hand in hand with US renewed growth. An increase of 0.5% is forecasted this time.
* All times are GMT.
USD/CAD Technical Analysis
$/C$ started the week by trading under the 0.9880 line (mentioned last week). This line held very well, and the pair eventually fell and found support at the 0.9817 line.
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. It worked very nicely in January 2013. 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 remain bearish on USD/CAD.
Canada is doing very well, as the latest jobs report shows. This could help the loonie overcome the technical barrier and break forward. It is important to remember that even if the Fed does eventually halt the open ended policy, this is still far in the distance. And while the US still has the debt ceiling issue, markets expect yet another last minute resolution, like with the cliff.
USD/CAD is not the easiest pair to trade lately. Here are 5 most predictable pairs for Q1 2013.
- 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.
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