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Looking for the latest outlook for this week? Check the full section: Canadian Dollar Forecast

After a holiday week without any events, the Canadian dollar expects all0important employment figures among other indicators. Will the Canadian dollar continue to hold strong against the greenback? Will it break out of range? Here’s an outlook for the major events in Canada this week, and an updated technical analysis for USD/CAD for the first week of 2010.

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

Canadian dollar forecast 2010

Traders of USD/CAD had a false break during the thin volume of the holiday week, but the pair is back into the range as traders return to the markets. Let’s start:

  1. RMPI: Published on Tuesday at 13:30 GMT. Canada’s Raw Materials Price Index impacts the economy, as it relies on commodities. Prices have been rather unstable in Canada. A drop of 1.1% was followed by a strong rise of 2.5% last month. Another rise is predicted this time – by 1.2%. A higher move will help the loonie.
  2. Ivey PMI: Published on Tuesday at 15:00 GMT. The Richard Ivey School of Business has show a serious drop in activity last month. This highly regarded indicator has risen nicely up to 61.7 but then fell to 55.9, lower than expectations. The downfall is expected to continue with 52.3 pints this time. Note that this still is in the expansion zone – above 50 points.
  3. Employment data: Published on Friday at 12:00 GMT. This is the major release of the week. Canada’s employment numbers moved strongly in the past three months. Last month, almost 80,000 jobs were added and the unemployment rate fell to 8.5%. This helped the loonie weather the storm of the greenback. One month earlier, 43.3K jobs were lost, hurting the Canadian dollar. This also erased the gains that helped the loonie  one  month before that. As you see, it’s not boring… This time, a gain of 20,000 jobs is predicted in the Employment Change number. Unemployment Rate is expected to remain unchanged at 8.5%. A surprise to both directions sure is possible. Note that this release comes 90 minutes before the American Non-Farm Payrolls. This makes these hours very volatile for USD/CAD.

USD/CAD Technical Analysis

USD/CAD made a false break in the past holiday week, dipping under 1.04. It then returned to the range mentioned in last week’s outlook, closing in the middle – at 1.0512.

USD/CAD trading continues to be characterized by the 1.04 – 1.0750 range that has been with us from the beginning of November. The Canadian dollar didn’t go above 1.0750, even when the dollar was sweeping the board.

Looking above, 1.0850 is the next resistance line, serving as such just before the pair entered this range. A more serious resistance line appears at 1.1130, a line which USD/CAD tested more than once in 2009.

Below 1.04, 1.0205 is the next support line. This was the bottom line in 2009. Even lower, USD/CAD parity is the ultimate support line. Apart from being a huge psychological barrier, it served as a support and resistance line in 2008.

I remain neutral on USD/CAD.

Canada has many reasons to enjoy a strong currency. Inflation and housing are picking up and employment numbers published this week can also help the pair. The reason for not being bearish (pro-Canadian dollar) is that the US dollar shows great strength in the last month.

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