The Canadian dollar made nice gains against the greenback, riding on an excellent jobs report in Canada. However, USD/CAD support was not broken. Ivey PMI, Housing data and Trade balance are the major events this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The Canadian Jobs market registered another excellent report, adding 39,800 full-time jobs in December after an impressive increase of 59,300 in the previous month. The ongoing improvement drove unemployment rate down to a four year low of 7.1% from 7.2% in November, contrary to predictions. Also the OK Non-Farm Payrolls in the US helped the loonie.
Updates: Canada continued to produce strong numbers, as Ivey PMI rebounded strongly, pushing above the 50 point threshold. The index came in at 52.8 points, beating the estimate of 51.3 points. Housing Starts will be released on Wednesday. The loonie is steady, as USD/CAD was trading at 98.58. Canadian Housing Starts rose slightly to 198 thousand, matching the forecast. Building Permits plunged, with a decline of 17.9%. The markets had anticipatedd at gain of 2.4%. NHPI rose 0.1%, a notch below the estimate of 0.2%. The loonie has edged lower, as USD/CAD was trading at 0.9864.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
- Ivey PMI: Monday, 15:00. Purchasing Managers’ Index unexpectedly dropped to 47.5 in November from 58.3 in October, while analysts expected a climb to 58.8. The recent drop goes hand in hand with the weak GDP figures registered in the last couple of months and the slowdown in Manufacturing PMI. This was the lowest reading in more than a year. A rise to 51.3 is expected now.
- Housing Starts: Wednesday, 13:15. Canadian housing starts declined in November to 196,125 units after a 203,000 reading in September indicating a slowdown in the housing sector. The slump was sharper than the 201,200 forecast. The main decline occurred in single and multi-unit housing construction in Ontario and British Columbia. An increase of 198,000 is expected this time.
- Building Permits: Thursday, 13:30. Canada building permits edged up 15% in October reaching a record C$7.49 billion ($7.57 billion), following a 12.7% fall in the previous month. The rise was due to higher construction intentions for non-residential buildings. The sharp rise was way above the 2.6% increase predicted by analysts. Another rise of 2.4% is anticipated.
- NHPI : Thursday, 13:30. Prices of new homes continued to increase for the 19th consecutive month in October, rising by 0.2% following a similar increase in the previous month. Analysts expected a 0.1% increase. The rise came despite the tighter mortgage rules imposed by the government in July. A similar rise of 0.2% is forecasted.
- Trade Balance: Friday, 13:30. Canadian trade deficit narrowed considerably in October posting a trade deficit of C$169 million from a revised C$1.01 billion deficit in September. The improvement occurred in light of increased exports and a fewer imports. Imports dropped 1.2% to C$38.28 billion while higher prices and volumes drove up exports by 1.0% to C$38.l1 billion. A rise to C$300 million is expected now.
* All times are GMT.
USD/CAD Technical Analysis
$/C$ began the week tumbling down and losing the 0.9950 line (mentioned last week). It then continued lower and 0.9880 served as resistance. A later surge didn’t succeed and the pair eventually closed at 0.9870.
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. 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.
Narrowing Channel
The black lines on the chart show a narrowing channel that is emerging around the price. Uptrend support began before downtrend resistance and is more significant. The pair currently leaning lower.
I remain bearish on USD/CAD.
Even if the Fed is indeed less dovish than beforehand and will not print dollars for an “infinite” amount of time, the reason is an improvement in the US economy. Such an improvement is actually positive for the C$: more US demand means a stronger Canadian economy. And the Canadian economy is indeed very strong, as the latest jobs report shows.
In case you missed it, here are the 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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