The Canadian dollar continued to lose ground last week, as it came close to the 1.10 level and posted modest losses. The pair closed the week at 1.0960. The upcoming week has a very light schedule, with just two releases.
In the US, the recovery continues to gain strength. Unemployment Claims remained at low levels, and Core Retail Sales and the Philly Fed Manufacturing easily beat their estimates. It was a quiet week for Canadian releases, but USD/CAD continues to climb and is flirting with the 1.10 level.
[do action=”autoupdate” tag=”USDCADUpdate”/]
- Manufacturing Sales: Monday, 13:30. The week opens up with this key release. The indicator posted a respectable gain of 1.0% last month, crushing the estimate of -0.2%. The estimate for December stands at 0.4%. Will the indicator repeat with another strong reading and beat the forecast?
- Wholesale Sales: Monday, 13:30. This important consumer spending release jumped 1.4% in November, well above the estimate of 0.4%. The estimate for December stands at 0.6%.
- BOC Monetary Report: Wednesday, 15:00. The Bank of Canada Monetary Report will be closely reviewed by analysts looking for clues as the Bank’s future monetary policy. A report that is more hawkish than expected is bullish for the Canadian dollar.
- BOC Overnight Rate: Wednesday, 15:00. The BOC will set its benchmark interest rate, which has been pegged at 1.00% since July 2010. No change is expected in the rate level.
- Core Retail Sales: Thursday, 13:30. This key indicator is the most important consumer spending indicator. It excludes automobile sales, which are very volatile. The November reading improved to 0.4%, beating the estimate of 0.0%. The markets are expecting a modest gain of 0.3% in the upcoming release.
- Retail Sales: Thursday, 13:30. Retail Sales disappointed last month, coming in at -0.1%. This was the first decline in four months, and fell shy of the estimate of 0.3%. The December estimate remains at 0.3%.
- Core CPI: Thursday, 13:30. Core CPI excludes the most volatile items, making it a better gauge of inflation than CPI. The index continues to look weak and declined 0.1% last month, missing the estimate of 0.1%. The markets are braced for a -0.4% reading in the upcoming release.
- CPI: Thursday, 13:30. CPI is pointing to weak inflation, indicating an underperforming Canadian economy. The index came in at a flat 0.0%, shy of the estimate of 0.2%. The forecast for the December reading stands at -0.2%.
*All times are GMT.
USD/CAD Technical Analysis
USD/CAD opened the week at 1.0960 and quickly touched a low of 1.0843, breaking below support at 1.0853 (discussed last week). The pair then reversed directions, climbing to a high as 1.0991, breaking above resistance at 1.0945. The pair closed the week at 1.0960.
Live chart of USD/CAD: [do action=”tradingviews” pair=”USDCAD” interval=”60″/]
Technical lines, from top to bottom:
We start with resistance at 1.1369. This line fell in October 2008 as the US dollar posted huge gains, climbing as high as the 1.21 level. It has remained intact since July 2009. This is followed by resistance at 1.1124.
1.0945, which had provided resistance since September 2009, was breached last week as the pair moved higher. It starts the week in an unfamiliar support role.
1.0853 is the next support line. It was breached early in the week as the pair dropped to lower levels,, but remains a support line as we begin the week.
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 was breached early in the week as the loonie took a tumble. It saw a lot of activity in the second half of December.
1.0523 was a peak back in November 2011 and has provided support since late November.
1.0446 is the final support line for now. It has held since mid-November, when the US dollar continued a rally which saw it break above the 1.07 line.
I am bullish on USD/CAD
The Canadian dollar remains under strong pressure, and the 1.10 level looks like it could raise a white flag this week as the US dollar continues to move higher. With more QE expected from the Federal Reserve and the Canadian economy continuing to struggle, there’s additional room for the pair to move upwards.
- 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.