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The Canadian dollar  rose sharply  last week,  as USD/CAD    lost about 170 points, and closed at 1.0188.  The upcoming week has just three releases, highlighted  by Manufacturing Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.

The Canadian dollar got a strong boost from excellent domestic numbers. Ivey PMI hit a fourteen-month high, and Employment Change was outstanding, recording a rise of 95.0 thousand.

Updates:

  • Canadian housing starts surprised to the upside and rose from 176K to 200K. This pushed USD/CAD lower.
  • S&P changed the credit outlook for the US from negative to stable. This temporarily helped the US dollar.
  • The US dollar has rebounded, as USD/CAD has pushed back above the 1.02 level.
  • The Canadian dollar shows strength and enjoys the weakness of the greenback. USD/CAD is around 1.0170.
  • USD/CAD extends its drops and reaches the lowest since May 16th – almost a one month low.
  • Canada will release NHPI and Capacity Utilization Rate later on Thursday. There are two key releases on Friday – Manufacturing Sales and PPI.
  • Manufacturing sales disappointed with a drop of 2.4%, coming on top of a downwards revision. This limited the loonie’s rally. USD/CAD is currently at 1.0170, after having broken below 1.0150.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:     USD CAD Forecast June10-14

  1. Housing Starts:  Wednesday, 12:15. The housing sector is an important component for economic growth, this indicator measures the number of new residential starts each month. In May, the indicator dropped to 175 thousand, which matched the estimate. The markets are expecting a similar reading in the upcoming release.
  2. NHPI: Thursday, 12:30. This housing inflation indicator has been quite steady, with a small gain of 0.1% in the previous reading. The estimate for the June release stands at 0.3%, which would be the highest gain in almost a year.
  3. Manufacturing Sales: Friday, 12:30.  This key indicator has not looked sharp, with declines posted in three of the past four releases. The May reading was a disappointing -0.3%, as the forecast called for a 0.6% gain. The markets are expecting better news in June, with an estimate of 0.1%.

* All times are GMT

USD/CAD Technical Analysis

Dollar/CAD started the week  at 1.0359 and  touched a high of 1.0380 early in the week.  The loonie  then  took flight,  as the pair dipped to a low of 1.0166. Dollar/CAD  closed out the week at 1.0188, as the support level at 1.0180 (discussed last week) remained intact.

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

Technical lines, from top to bottom:

We start with 1.0758. This is a strong resistance line which has held firm since  April 2010. Next is 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 95 line.

1.0523 was a peak back in November 2011 and continues to provide strong resistance. 1.0446 was the peak that the pair recorded in June 2012 and  remains a  key line on the upside.  The line of  1.0340 has switched to resistance as the pair dropped sharply this week. The next resistance line is at 1.0285. This line has strengthened as USD/CAD trades at lower levels.

USD/CAD is receiving  support at 1.0180. This line was briefly breached late last week, but remains intact. It could be tested early next week if the Canadian dollar continues to push higher.

1.0125 gave its support to the pair during April 2013 and remains important.  1.01 was a trough back in July, and switched to resistance afterwards. It has reverted  back to a support line.

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.

0.9950 provided some support for the pair during November and worked as resistance earlier.  There is further support at 0.9880, which  showed that it is a clear separator in October 2012, and continues to provide strong support.

0.9833 has provided support since mid-January. The finals support line for now is at 0.9773, which last saw action in November 2012.

I  am bearish  on USD/CAD

US numbers continue to struggle, as underscored by disappointing Non-Farm Payrolls late last week. The US dollar was broadly lower as a result, and the loonie jumped on the bandwagon, posting strong gains. The Canadian dollar also got a boost from some strong Canadian releases. If Canadian numbers continue to improve, we could see the pair make a run towards  the parity level.

 Further reading: