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The Canadian dollar  showed some movement in both  directions, but ended up  almost unchanged  on the week.  USD/CAD  closed the week slightly above the 1.05 level, at 1.0515.  It is a shortened week as the markets are  closed on Monday for a holiday, but all four Canadian releases are market-movers, so we could see quite a bit of activity from USD/CAD.  Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The US dollar has posted strong gains against the Canadian currency  since mid-June, but  the  pair  showed little net movement last week. The US dollar remains strong, thanks to mostly solid releases last week. Canada’s only major release last week, GDP, had little impact on the pair.  GDP was up  just 0.1%, matching the estimate.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:   USD CAD Forecast July1-5

 

  1. Trade Balance: Wednesday, 12:30.   Canada continues to record monthly trade deficits, as the country has not posted a surplus since May 2012. The previous release came in at -0.6 billion dollars, missing the estimate of -0.4 billion. The estimate for the July reading stands at -0.7 billion dollars.
  2. Employment Change: Friday, 12:30.  Employment Change is one of the most important indicators, and can  have a major effect on  USD/CAD. The indicator  was red-hot last month, climbing to 95.0 thousand, blowing past  the estimate of 15.1 thousand.  The  markets  are bracing for a much  weaker release in  July, with an  estimate of -12.3 thousand. The  Unemployment Rate has been quite steady in recent releases, and is expected to remain unchanged in the upcoming release, at 7.1%.
  3. Ivey PMI:  Friday, 2:00.  Ivey PMI sparkled in the June release, jumping from 52.2 points to 63.1 points. This was the highest level in over a year, and easily beat the estimate of 59.6 points.  The markets are expecting a lower reading this time around, with an estimate of 59.6 points.

* All times are GMT

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

USD/CAD Technical Analysis

Dollar/CAD started the week  at 1.0480. The pair  touched a  high of 1.0556  early in the week, and then  dropped all the way to 1.0424, as it broke through support at 1.0446 (discussed  last  week).  USD/CAD  closed out the week at 1.0515.

Technical lines, from top to bottom:

 1.1028 is providing strong resistance. This  is followed by 1.0853, which has held steady since September 2009.

1.0705 saw a lot of action in  January 2010, but  has quietly provided resistance since then. Next, 1.0652 has been providing resistance since early September 2010. This marked a peak as USD/CAD went on a steep slide, falling as low as the 0.95 line.

1.0523 was a peak back in November 2011 and continues to provide resistance. This line fell as the USD/CAD dropped during the week, but remains intact in a resistance role, albeit as a weak line. It could see further action next week.

1.0454 finds itself in an unfamiliar support role. The pair briefly broke through this line last week, but  it continues to provide support as we start the week.

The line of  1.0340  saw a lot of activity in June, and continues to provide support. This is followed by 1.0285, which was breached  as a resistance line  in mid-June, as the US dollar rallied.

1.0180 continues to provide support. It has strengthened as the pair trades at higher levels.

The round number of 1.01 was a trough back in July, and switched to resistance afterwards. It has reverted  back to a support line, and has held firm since mid-May.

1.0050 provided support for the pair in May 2013 and in other occasions beforehand. It remains a barrier before parity. The very round number of USD/CAD parity is a clear separator, and the battle was very clear to see at the beginning of August 2012 and also in 2013.

The final support line for now is 0.9950. This line  provided some support for the pair during November and worked as resistance earlier.

I  remain  bullish  on USD/CAD

 Talk of QE tightening continues to bolster the US dollar, and  has  hurt the Canadian dollar, which continues to trade in the  1.05 range. As well, strong US releases have helped the greenback maintain its strength. If this week’s Canadian releases, notably Employment Change,  fails to impress the markets, the loonie could lose more ground this week.

 Further reading: