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 is trading under 1.05 on Canada Day, a market holiday. Canadian traders will go back to business, and it is going to get busier.
US ISM Manufacturing PMI came in at 50.9 points, indicating expansion, beating the estimate of 50.6 points.
Both Canada and the US release Trade Balance numbers on Wednesday.
USD/CAD peaked at 1.0477 before sliding back down. Trade balance will be followed.
Canada’s trade deficit came out better than expected, at only 0.3 billion. Better than expected job gains in the US on the other hand, provide support for the pair.
Crude Oil Inventories slumped to -10.3 million, well below the forecast of -2.6 million. Natural Gas Storage also dropped sharply from 95 billion to 72 billion.
Canada will release key employment data and the Ivey PMI on Friday.
USD/CAD daily chart with support and resistance lines on it. Click to enlarge:
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.
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%.
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:
For a broad view of all the week’s major events worldwide, read the USD outlook.
Kenny Fisher - Senior Writer
A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.
Kenny's Google Profile
Share
